The Pension Protection Act of 2006 includes a provision allowing some people to make charitable donations from their IRAs. You might think this is not necessary. On the surface, taking money from your IRA will generate taxable income but you’ll get an offsetting charitable deduction.
That’s often not the case, though. Quirks in the tax code may prevent you from getting a full charitable deduction, or any deduction at all. Under the new law, a “qualified charitable distribution” may be made directly from an IRA to a charity.
Such distributions may be made only on or after the date you have reached age 70 ½. They’re now limited to $100,000 per year, in 2006 and 2007. The future of this tax break is unknown, after that.
Insight: If you (or a parent) has to take minimum distributions from your IRA because you’ve reached age 70 1/2, it make sense to use those distributions to fulfill your charitable intentions. You won’t get any tax deduction but you will be able to meet the minimum distribution requirements without owing income tax on direct transfers to charity.
