An expired tax benefit which was originally enacted for the years 2006 & 2007 has recently been reinstated effective for 2008 and 2009 under the recent Bailout law called the Emergency Economic Stabilization Act of 2008.

This important tax opportunity allows distributions from an IRA to be made directly to a charitable organization without having the IRA taxed to the donor.

A donor who is at least 70 ½ years of age is permitted to make a charitable gift directly from an IRA (Individual Retirement Account) without reporting the IRA distribution as income. This type of contribution satisfies the annual required minimum distribution rule (RMD).

The maximum limit that can be donated is $100,000 for 2008 and $100,000 for 2009.
Under current law, if a donor makes a contribution to a charity, the annual deductible amount is limited to 50% of their adjusted gross income (AGI) and any excess is carried forward for 5 years. In addition, other itemized deduction limitations can also reduce the annual deductible amount. The new law eliminates these % limitations.

Also, for Estate planning purposes, it is best to dispose of IRA’s since the overall federal tax liability (income and estate taxes) for someone who dies with an IRA can be extremely high (top income tax rate is 35% + top estate tax rate is 45% = 80%).

The contribution must be made from an IRA. However, it is possible to structure the contribution so that other retirement plans may qualify if a pension plan, 403 (b) or 401(k) is first rolled over to an IRA, then contributed to a charity.

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