There is a new law that may help those committed to making a gift this year called the Emergency Economic Stabilization Act of 2008. This new law contains incentives for charitable giving to qualifying non-profit organizations like the Virginia Interfaith Center.
In 2009, an owner of an IRA (traditional and Roth both qualify) who is age 70 1/2 or older may instruct the IRA manager to distribute directly to a charity such as the Center up to $100,000 without the distribution being included in taxable income. The distribution will count toward the IRA owner's mandatory withdrawal amount.
-The donor must direct the IRA manager to transfer the funds directly to the charity. A donor should not make a withdrawal followed by a contribution.
-Any gift must be outright to the charity. The IRA rollover cannot be used to fund a charitable gift annuity or charitable remainder trust. Donor Advised Funds are not eligible.
-IRA rollover gifts can be used to satisfy charitable pledges. No charitable deduction is allowed but the gift is not includible in the donor's income.
-This law is temporary. $100,000 is the limit. Transfers must be made by December 31, 2009. The rule will not apply in 2010. It applies only to IRAs, not to 401(k)s or other retirement plans.
The deductibility "ceilings" (50% of adjusted gross income for cash, 30% of AGI for appreciated property) do not apply to IRA rollovers. Therefore, if a donor has reached the deductibility limits, this law allows for a further giving opportunity without waiting until the next calendar year.