Thursday, December 7, 2006

Donations from your IRA

Donations from your IRA may or may not be beneficial. If you donate from your IRA, you don't pay tax on the withdrawal.....BUT you cannot deduct it as an itemized deduction. So it may or may not be a wash-out. But it may be beneficial under some circumstances. <--more-->

Section 1201 of the Pension Protection Act of 2006 (H.R. 4) authorizes taxpayers who are at least age 70½ to make direct charitable contributions from their IRAs. This opportunity offers many potential tax benefits to those who elect to do it. By doing what it allows, a taxpayer can benefit in one or more of the following ways:
Receive tax-free income if his charitable contribution would otherwise be lost because he does not itemize.
Avoid receiving income that would result in the taxation of 50%/85% more of his social security benefits.
Lower his AGI, increasing his net medical and miscellaneous itemized deductions.
Lower his AGI, reducing the loss of itemized deductions due to the phase out.
Lower his AGI, reducing the loss of personal exemptions due to their phase out.
Lower his AGI, reducing the loss of various other deductions and/or credits due to their phase outs. Bypass the 50% deduction limit on charitable contributions

NOTE: A direct transfer means it goes straight from the IRA to the charity. You can't withdraw the cash and then donate it to get this benefit.

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