In 2008, Congress enacted into law a bill that permitted individuals over age 70 1/2 to direct up to $100,000 from their IRAs to charities rather than take that sum into taxable income and thereafter itemize the charitable gift(s).  Some folks call this a “Charitable IRA roll-over”, which is a bit of a misnomer since charities cannot roll-over IRAs.  This law was extended through December 31, 2009.  This idea is particularly attractive for high income taxpayers whose deductions get phased out as their incomes increase.

Also last year, due to significant declines in investment accounts, required minimum distributions from IRAs were suspended, which might allow for those accounts to rebound a bit.  This suspension was also carried over to include distributions in 2009.  This does not mean that you cannot take money from IRAs – you just won’t be required to do so if you don’t need the money.  

Our friends at WEDU, a Tampa-based public television station, passed along news that the House of Representatives may vote as early as next week to further extend the Charitable IRA roll-over law through 2010.  This makes great sense, since charitable gifts this year are down substantially for obvious reasons.  Plus, who would take money out of their IRAs if they do not have to? 

If you want to make gifts to charity this year, consider one of the following tax-efficient options: (i) gift appreciated assets, or (ii) sell a capital asset that has a current fair market value that is less than its cost basis (a “loss” asset) and thereafter gift cash.  In the former case, you won’t have to recognize capital gains nor will your charity.  In the latter case, you can recognize your loss against capital gains and, if applicable, up to $3,000 against ordinary income.

You only have 4 weeks left to make your 2009 charitable gifts; be smart about which bucket you make them from!  We are happy to discuss these tax planning scenarios with you – we are only a phone call away.