Year-End Planning – Individuals 70 ½ or Older Should Consider Charitable Gifts from IRAs

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The Internal Revenue Code currently provides a tax break for individuals age 70 ½ or over to make distributions of up to $100,000 from an IRA to a charity and exclude the distributions from taxable income.  This generally results in tax savings compared to either (1) the taxpayer making charitable gifts using other, after-tax assets, or (2) the taxpayer taking a distribution from his or her IRA and then contributing the distributed funds to a charity.  Because the amount distributed from the IRA to charity is not included in taxable income, it is not subject to the 50%/30%/20% of AGI limitations on charitable deductions.

This provision is set to expire on December 31, 2011.  Taxpayers who are planning year-end charitable contributions should consider whether the contribution may be completed using IRA assets.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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