The Rogé Report

December 2006

’Tis The Season For Giving By Way Of Your IRA
By Rosanne Grande, CFP^®, CSA, RFG^SM

Rosanne Grande, CFP^®,
CSA, RFG^SM
Managing Director

Well, it’s that “giving” time of year again…time sure does fly.

The good news is that the IRS has given those individuals who can afford to be philanthropic a present in the form of a tax break. Thanks to the recently passed Pension Protection Act of 2006, those individuals who are age 70½ or older and have an IRA can make a direct gift of up to $100,000 a year to a public charity from their individual retirement accounts. Best of all, these gifts count towards your minimum required distribution (MRD) and are not considered part of your adjusted gross income.

The key word here is direct.

The qualifying donation must go from your brokerage or bank IRA account directly to the charitable institution without passing through your hands along the way. More importantly, the check that your custodian sends to the charity on your behalf should for tax purposes include your name and address as the donor so the beneficiary institution can send you an official letter of acknowledgment. The main benefit is that you are now able to act on your charitable impulses using tax-free money.

There are, however, a few things to bear in mind:

If you make the contribution directly from your IRA you cannot claim a charitable deduction on your income tax return. As stated above, you will not be taxed on the distribution.
The gift provision is good only for tax years 2006 and 2007.
This charitable distribution break does not apply for distributions from 401(k), SEP or SIMPLE accounts. Instead, such plans must be rolled over into an IRA account before the qualified distribution is permitted and you must first take your minimum required distribution for the year. If your IRA MRD is $10,000 and you roll over $100,000 to your IRA to qualify for the charitable gift provision, the charity will only get $90,000. The $90,000 donation is not considered income to you nor does it qualify as a tax deduction. The $10,000 IRA MRD is reported as income on your tax return.
Be sure the charitable organization is “qualified.” Donor-advised funds (offered by many community foundations and some financial institutions) and non-operating private foundations do not qualify for gifts under this provision.

It’s important to check with your IRA custodian to see what procedures they have in place to accomplish your gifting goals.

All of us at R.W. Rogé & Company, Inc. wish you a very happy holiday season and a happy, healthy, prosperous and giving New Year.

For additional information visit us at www.rwroge.com or call our office at
631-218-0077 and ask for introductory information about our services.

R.W. Rogé & Company, Inc • 630 Johnson Avenue • Bohemia, NY 11716 • Phone: 631.218.0077 • Fax: 631.218.0147