Smaller Print Larger Print
800-336-4529 618-985-4529
Congress wanted to help charities assisting in the Hurricane Katrina relief. So they decided to allow unlimited gifts to charity – up to a donor's total income.

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

Guide to 2005 IRA Gifts

Guide to 2005 IRA Gifts

 

What is the new 2005 IRA gift concept?

 

Congress wanted to help charities assisting in the Hurricane Katrina relief. So they decided to allow unlimited gifts to charity - up to a donor's total income.

 

How does this affect IRA gifts?

 

When a person over age 59½ withdraws funds from his or her IRA, the withdrawal will be included in the IRA owner's taxable income. Under the new 100% of income charitable gifts option, the withdrawn funds may be given in full to charity. The full gift will then be deductible. In addition, since the 100% deduction applies regardless of the gift source, withdrawals and gifts may also be made from 401(k) plans, 403(b) plans or other qualified retirement plans.

 

Is there a dollar limit?

Good news - the IRA withdrawal and gift option is unlimited. A person can withdraw and give $1,000 or $1,000,000.

 

When is this 100% gift deduction rule applicable?

 

Qualifying cash gifts must be made between August 28, 2005 and December 31, 2005.

 

How should a donor make this gift?

 

The IRA owner should withdraw the desired amount this year and make the gift by December 31, 2005. Warning - some IRA custodians take two to three weeks to process withdrawal requests! IRA owners should make the withdrawal request by early December to allow time for processing by the IRA custodian. Donors must have the cash available by December 31 to qualify.

 

With a large IRA withdrawal and then gift, will the donor receive a full deduction?

 

Yes, the withdrawal increases taxable income, and the gift reduces taxable income.

 

Are there other income tax limits that are affected?

 

Usually, for higher income taxpayers, 3% of itemized deductions are not allowed. For cash gifts to charity between August 28 and December 31, 2005, the 3% reduction does not apply. 100% of the gift is deductible. It appears that the IRS will treat these charitable deductions as itemized deductions not subject to the 3% rule.

 

Will state income taxes be a factor?

 

Yes.  Taxpayers should check with their tax advisor to determine the actual effect.

 

Will there be other income tax effects?

 

There may be for some donors. Again, check with your tax advisor.

 

Must the IRA 2005 gift be for Katrina relief?

 

No, if the gift is by an individual but, yes, if it is by a corporation. A corporation may give up to 100% of taxable income for Katrina relief. An individual may make an IRA 2005 gift to public charities for any purpose.


Contact Us

Name *

Phone *

Email *

Tell us more *


Physical Address
1808 Clark Street, Carterville, Illinois 62918
Phone: 618-985-4529
Toll Free: 800-336-4529
Get Directions

Mailing Address
1808 Clark Street
Carterville, Illinois 62918
Phone: (618) 985-4529
Get Directions

Offices

Physical Address
1808 Clark Street, Carterville, Illinois 62918
Phone: 618-985-4529
Toll Free: 800-336-4529

Mailing Address
1808 Clark Street
Carterville, Illinois 62918
Phone: (618) 985-4529