As we reported in earlier issues of Personal Planning Strategies, the Pension Protection Act of 2006 included a provision that permits a person aged 70 ½ or older to direct distributions of up to $100,000 per year directly from an Individual Retirement Plan ("IRA") to charity. The provision had expired but the 2010 Tax Act reinstated it. However, the latest version of this provision expires at the end of 2011.
The benefit of making a direct distribution from an IRA to charity is that the IRA owner can exclude up to $100,000 of the distribution from his or her gross income, and such distributions are counted as part of their annual minimum required distributions. Because the IRA distribution is excluded from gross income, the IRA owner is not entitled to a charitable income tax deduction for the charitable gift. There are several technical requirements that must be met in order to ensure that the charitable IRA distribution will be excluded from gross income.
In the past, this provision has been extended after its expiration. However, despite lobbying from many charitable groups, it is uncertain whether this provision will be extended into 2012. Therefore, those who wish to take advantage of this opportunity should do so immediately