 Giving IRA money to charity
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 Dear
Tax Talk,
I read that under the new pension law you can give your IRA money to charity and get a deduction. How does it work?
-- Andy
 Dear
Andy,
Last month Congress passed and the president signed one of the largest
(around 1,000 pages) pension
plan reform laws in the last couple hundred years. After we
figure it out, you can rest, knowing that your pension money is
safer or that more large employers won't make empty promises of
excellent retirement benefits.
The IRA charitable contribution provision is not a windfall for taxpayers or charities. The bottom line is that you can give up to $100,000 from your IRA to a charitable organization in this year and next, but you won't get a deduction for the contribution if you would have had to pay tax on the distribution from the IRA.
For example, if you give $10,000 from your traditional
IRA and that would have been income to you, you won't get a tax
deduction on your tax return, but neither will you recognize the
income. This break allows individuals with substantial accumulations
in their IRAs to give away some funds that they might have otherwise
wanted to, without recognizing income. Since some tax breaks are
keyed to your level of income, not recognizing the distribution
helps.
If you give the money from your Roth IRA, you can claim a deduction since you previously paid tax on the Roth IRA money. Of course, if you make a charitable contribution out of other funds and replace it later with Roth funds, you don't pay tax on the Roth distribution and you still have your charitable contribution deduction.
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