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Use Your IRA to Support Boston University
On October 3, 2008, Congress extended the Pension Protection Act of 2006 through December 31, 2009. This legislation provides tax incentives for charitable gifts from donors who are 70½ or older and encourages financial support of charitable organizations across the United States.
Under the law, you can make a lifetime gift using funds from your individual retirement account (IRA), Roth IRA or rollover 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 can also take advantage of this option both in 2008 and 2009 allowing you to support Boston University for two years.
You may contribute funds this way if:
- You are age 70½ or older
- The gift is $100,000 or less each year
- You make the gift(s) on or before December 31, 2008/2009
- 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
How The New Law Works
Jane, aged 80, has $450,000 in an IRA and has pledged to give $75,000 this year. If Jane transfers $75,000 from the IRA, she will avoid paying income tax on that amount. She cannot, however, claim a charitable deduction as well - it is a pure "wash." Jane has found an easy way to benefit charity without tax complications.
If she desired, Jane could give more than $100,000. The legislation allows a maximum $100,000 gift in both the 2008 and 2009 tax years. So Jane 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
Contact your IRA custodian to transfer your desired gift amount to an eligible organization.
For More Information
It is wise to consult tax professionals if you are contemplating a gift under the law. Please feel free to call the Office of Planned Giving at 617-353-2254 or 800-645-2347 with any questions, or email Molly McCarthy, Assistant Director, Planned Giving at mollym@bu.edu.
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