Avoiding a Taxing Matter

IRA and Charitable Gifts
The Pension Protection Act of 2006 may help your charitable gift-giving practices in 2007 if you are 75 ½ years old and withdrawing from an Individual Retirement Account (IRA). Under this new Act, donors will be able to make tax-free withdrawals directly from their IRAs for charitable contributions.

The amendment permits tax-free charitable IRA contributions not to exceed a total of $100,000 annually per individual or $200,000 per couple if both hold separate IRA accounts. Donors who have benefited from the un-taxed growth of their IRA now will benefit when making charitable contributions with those funds. Because the donor will not have to recognize income from the withdrawals, their adjusted gross income will be lower, so self-employment and social security taxes will be lower. Other benefits may include elimination of the 3% phase-out of charitable deductions, possible avoidance of the alternative minimum tax, and reduced paper work for those donors who no longer need to itemize their deductions.

Strategy for Donors
Retirees face significant penalties unless they meet required minimum IRA withdrawals. Charitable contributions made through their IRA in 2007 can be used to satisfy these minimum requirements. Donors may consider using permissible IRA withdrawals for charitable purposes first before making donations with other taxable income.

Financial institutions administering the IRA will be able to process the donation and resulting paperwork so the donation process should be easy. If you have questions about the IRA charitable giving, please e-mail or call the Center at historyfriends@aip.org or 301-209-3006. The AIP Center for History of Physics is a 501(c) (3) charitable organization.

RETURN to Spring 2007 Newsletter Table of Contents

Center for History of Physics E-mail: chp@aip.org Phone: 301-209-3165

© 2006 American Institute of Physics, One Physics Ellipse, College Park, MD 20740-3843. E-mail: aipinfo@aip.org Phone: 301-209-3100; Fax: 301-209-0843