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Jewish Community News
News: February 2007
New charitable giving laws
The IRS has enacted two major changes concerning personal charitable contributions.
The changes relate to IRA rollovers, and acceptable deductions.
The recently enacted Pension Protection Act of 2006 provides a significant charitable giving opportunity for individuals aged 70 1/2 and older. Under normal tax rules, making a lifetime charitable gift from an IRA often produces disadvantageous tax consequences to the donor. The distribution from the IRA would be considered taxable income and the charitable deduction is often limited or phased out at higher income levels. The new Act allows qualified distributions to circumvent taxation altogether. Because the IRA donor gives directly to the charitable organization and never actually receives the cash, the distribution is neither included as taxable income or a tax deduction, thereby bypassing any potential deductibility pitfalls.
In order for a distribution to qualify, the following criteria must be
met:
1. The IRA donor must be at least aged
70 1/2.
2. The distribution must be made by
December 31, 2007 to qualify for the
same year.
3. Maximum qualified annual gift is
$100,000.
4. The charitable “roll-over” may not be
made to donor advised funds,
supporting organizations, private
foundations or charitable remainder
trusts.
As always, anyone considering using this vehicle to make a charitable
contribution should consult their tax advisor.
Also beginning in 2007, all cash gifts, regardless of amount, must be
substantiated by a bank record or written communication stating the charity’s
name and amount and date of contribution. Self-created records will not
be accepted. A canceled check will suffice for records. The Jewish Federation
has changed its policy and will now receipt all gifts.
For Clothing and household gifts made after August 17, 2006, deductions
will only be allowed if the household items are in good used condition,
or better. If the deduction exceeds $500, a qualified appraisal will be
required for the deduction. These items do not include fine arts or jewelry,
for which appraisals were necessary previously. It does however mean that
socks and underwear, or items not in working order, may not be deducted.
These issues are represented to the best of Federation staff knowledge.
Please direct any questions to a certified tax advisor.
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