Use Your IRA for Year End Gifts as Never Before

If you are 70½ or older and must take a required minimum distribution from your IRA for 2006, it might be beneficial to know that the new Pension Protection Act of 2006 encourages financial support of charitable organizations like the OWC Foundation.

You can make a lifetime gift using funds from your individual retirement account (IRA) without undesirable tax effects. Previously you would have had to report any amount taken from your IRA as taxable income, then take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. In effect, this caused some donors to pay more in income taxes than if they didn’t make a gift at all.

Fortunately, now these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gift now – while you are living and able to witness the benefits of your generosity.

You may contribute IRA funds this way if:

• You are age 70½ or older
• The gift is $100,000 or less each year
• You make the gift on or before Dec. 31, 2006 or Dec. 31, 2007
• You transfer funds directly from an IRA or Rollover IRA
• You transfer the gift outright to one or more public charities, but not supporting organizations or donor advised funds

Example of How The New Law Works

Pat, aged 80, has $450,000 in an IRA and has pledged to give $75,000 this year. If Pat transfers $75,000 from the IRA, she will avoid paying income tax on that amount. She cannot, however, claim a charitable deduction--it is a pure “wash.” Pat has found an easy way to benefit a favorite charity without tax complications. If she desired, Pat could give more than $100,000. The legislation allows a maximum $100,000 gift in both the 2006 and 2007 tax years. So Pat could give $100,000 each year. If her spouse has an IRA and is 70½ or older, he can also give up to $100,000 each year.

How to Make a Gift

Prior to making a gift, contact the recipient organization to ensure that they are an eligible organization. Once you have received this confirmation and any special instructions, contact your IRA custodian to transfer your desired amount. It is wise to consult tax professionals if you are contemplating a gift under the new law. Please feel free to call James P. Chitwood at 850-729- 5357 or chitwood@owc.edu with any questions. (This information is not intended as legal, tax or investment advice. For such advice, please consult an attorney, tax professional or investment professional.)

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2006 Annual Heart Walk

More than 100 OWC employees and friends participated as part of the OWC Team for the American Heart Associatio's annual Heart Walk, held at the OWC Niceville campus in October.

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