Also, suspension of account withdrawl requirement ending
NORTH BAY -- Now may be the last time to give to charities from an Individual Retirement Account without paying taxes on the distribution.
In 2009, there are no required individual retirement account minimum distributions for people over the age of 70 1/2. Last year, the IRA charitable rollover extension was put into effect as a retroactive expansion of the Pension Protection Act of 2006.
That act allowed individuals over the age of 70 1/2 to donate up to $100,000 per year from their IRAs to charities without paying taxes on the distributions.
But the year is coming to an end, and so far there has been no extension.
At 70 1/2 investors are required to pull funds from their IRA. The $100,000 exemption allows individuals to avoid paying taxes on the money while contributing to the community. The IRA custodian writes the check directly to the charitable organization. The law is in effect through the end of 2009 and is retroactive for all of 2008.
Cassie Gruenstein is the director of development and communications at Stinson Beach-based Audubon Canyon Ranch, a nonprofit that focuses on preserving natural resources of its three sanctuaries, while educating the public about the environment.
“We have noticed that it is a helpful thing for people,” she added. “It gives people one more option to use their money for charitable means.”
One organization that educates the public on charitable giving is the Northern California Planned Giving Council, part of the National Committee on Planned Giving.
The national committee was formed in 1988 when professionals in the field of planned giving, which came about because of legislation passed in the Tax Reform Act of 1969, felt there was a need for an organization to facilitate networking between professionals.
In the North Bay, there are more than 150 nonprofits.
Susan Mitchell, director of development at Hospice by the Bay, said, “The IRA distribution legislation is a gift to individuals and to the nonprofit industry. It could make the difference in whether an individual is able to continue supporting his or her favorite charity, while allowing more of their intended donation to go to the charity rather than to taxes. For Hospice by the Bay, these gifts allow us to continue providing the highest level of care and support services to all members of our community who need our services.”
The first time the tax break was effective was in 2006 when the Pension Protection Act became law. That was the first time an individual could pull from an IRA without calling it income and therefore avoid paying tax on the money.
Congress took it a step further, passing legislation in early December 2008 eliminating all minimum requirements.
Meanwhile, because of volatility in the stock market, many individuals’ investments lost substantial value, and the legislation was created with the recognition that people should not be forced to withdraw money when their account balances were at lower levels.
AARP worked with Congress to create the legislation.
“On behalf of the older Americans who are struggling during these turbulent economic times, AARP is pleased that the House took decisive action to help alleviate the financial burden facing tens of thousands of seniors who have seen their retirement savings shrink dramatically. By making minimum withdrawals from retirement savings accounts optional rather than mandatory for next year, older Americans are poised to hold on to more of their diminished nest eggs,” said AARP Legislative Policy Director David Certner in a statement following passage of the legislation.
This provision also expires at the end of the year.
