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Tax-free IRA distributions may be made directly to charities

During 2006 and 2007, distirbutions up to $100,000 per year may be made directly from an IRA to certain qualified charitable organizations by an individual who is 70 1/2 years of age or older. The IRA distribution is excluded from the IRA owner's income.

Direct transfers to charities under this provision of the new law have several advantages over regular charitable contributions:

• There is no need to itemize.
• There is no percentage of income limitation for a tax deductible charitable contribution.
• The distribution does not increase your AGI for purposes of limiting itemized deductions or causing social security benefits to be taxable.

Items to consider berfore making a transfer from your IRA to charity:

• IRA distributions can only be excluded from taxable income if:
  --the distribution is made in 2006 or 2007
  --the account owner is at least age 70 1/2
  --the distribution is made as a direct transfer from the IRA Trustee to the charity;and
  --nothing of value is received from the charity in exchange.
• Qualifed charities do not include donor advised funds, supporting organizations, or certain private foundations.
• Make sure you coordinate your distribution with the charity so that you get a receipt for the payment before your income taxes are filed.
• Direct payments to charity are considered to come from deductible contributions and earnings first.