There is a New Tax-Savings Opportunity for Older Donors

On Aug. 17, 2006, President Bush signed into law new tax incentives for charitable gifts from donors who are 70½ or older. The Pension Protection Act of 2006 encourages financial support of charitable organizations across the United States.

Under the law, you can make a lifetime gift using funds from your individual retirement account (IRA) without undesirable tax effects. Previously you would have had to report any amount taken from your IRA as taxable income, then take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. In effect, this caused some donors to pay more in income taxes than if they didn’t make a gift at all.

Fortunately, now these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gift now-while you are living and able to witness the benefits of your generosity.

You may contribute funds this way if:

	You are age 70½ or older
	The gift is $100,000 or less each year
	You make the gift on or before Dec. 31, 2007
	You transfer funds directly from an IRA or Rollover IRA
	You transfer the gift outright to one or more public charities

How The New Law Works
Pat, aged 80, has $450,000 in an IRA and has pledged to give Sigma Nu Educational Foundation, Inc. $75,000 this year. If Pat transfers $75,000 to Sigma Nu from the IRA, he will avoid paying income tax on that amount. He cannot, however, claim a charitable deduction-it is a pure "wash." Pat has found an easy way to benefit Sigma Nu without tax complications.

If he desired, Pat could give more than $100,000. The legislation allows a maximum $100,000 gift in both the 2006 and 2007 tax years. So Pat could give $100,000 each year. If his spouse has an IRA and is 70½ or older, she can also give up to $100,000 each year.

How to Make a Gift
Contact your IRA custodian to transfer your desired gift amount to Sigma Nu Educational Foundation, Inc.

For More Information
It is wise to consult tax professionals if you are contemplating a gift under the new law. Please feel free to call James A. Owens at 1-888-236-5323 or email us with any questions.