Donating Money from IRAs
(An excerpt from a Wall Street Journal article on October 25, 2008)
The federal government's bank-rescue plan extends a
way to give to charity. If you are at least 70 1/2 years old, you can donate as
much as $100,000 from your individual retirement account to charity tax-free.
And those distributions can count toward the required minimum distribution that
IRA holders who are 70 1/2 and older must take from their accounts every year.
The charitable-distribution provision was established by the Pension Protection
Act of 2006, expired Dec. 31, 2007, and then extended for this year and 2009 as
part of the bailout package signed into law this month.
The provision was extended "retroactively, as if it never expired," says Ed
Slott, an IRA consultant in Rockville Centre, N.Y.
The reader who wants to give his remaining required distribution to his church
certainly can do so. "Any school, college, church, United Way agency—any group
with 501(c)3 status—counts," Ms. Choate says. Among the charities that don't
count are donor-advised funds and private foundations.
The reader also is right to assume that he can't donate IRA withdrawals
al-ready deposited in his bank account. Donations have to go directly from the
IRA to the charity. For example, if he has to take a required minimum
distribution of $10,000 this year and already has withdrawn $5,000, he can
transfer only the additional $5,000 to his church.
If you are planning to give money to charity this year and you already have
taken your required IRA withdrawal, you may still want to consider your IRA as
the source of those funds, Mr. Slott says. That is because it's typically more
to your advantage to give away tax-deferred investments rather than those on
which you already have paid taxes.
One additional note: Even though charitable distributions are allowed from
IRAs, they aren't allowed from 401(k) accounts.