Window of tax-free opportunity for ’06 and ’07
November 22, 2006
On Aug. 17, President Bush signed into law the Pension Protection Act of 2006 (“PPA 2006”).
The legislation sets forth new rules and opportunities for those who donate to charity. Primarily, if you are age 70 or older, you may now transfer up to $100,000 in 2006 and 2007 tax-free from your IRA to a qualified public charity.
If your spouse is also age 70 or older, he or she may make a qualified distribution from his or her IRA, effectively allowing married couples to move up to $400,000 tax-free from their IRAs by the end of 2007.
The tax-free rollover of qualified charitable distributions can be particularly attractive for donors who need to take required minimum distributions from their IRAs.
Under the new law, you can satisfy your required minimum distributions of up to $100,000 by using these funds to make a tax-free qualified donation to charity. However, you cannot send the funds directly to the charity. You must arrange with your financial institution to send these distributions directly to your charity for you.
For more information about how you can take advantage of the new IRA-rollover-to-charities donation initiative and whether this technique has advantages for you, contact your tax and financial advisers as well as the charity to which you want to donate.
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• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of SmithBarney, a financial services firm serving Northern Nevada at 6005 Plumas Street, Ste. 200 Reno, NV 89509.