Congress Encourages IRA Gifts by People Over Age 70 1/2

I recieved this from our synod office.

Talk about a senior discount!

Congress has revised the tax law to permit donors over age 70 1/2 to make charitable gifts through their IRAs. The new law states that people age 70 1/2 and older can instruct IRA trustees to make transfers to organizations they support without incurring taxable income on those amounts. Up to $100,000 can be given in this manner, both in 2006 and 2007.

No income tax deductions are available for IRA gifts, but IRA donors can still save significant taxes. In fact, making charitable contributions through your IRA in 2006 and 2007 can enable you to increase the size of gift.

How does the new law let me increase my gifts?

IRA funds are heavily taxed whenever you draw them out, at rates as high as 35%. What's more, the tax burden never goes away - even your heirs will pay income tax on IRA funds they receive from your estate, and federal estate taxes may apply as well.

During 2006 and 2007 you have a satisfying alternative: Instead of sending so much tax off to Washington, DC, you can divert the tax collector's "take" from your IRA to a worthwhile cause.

Suppose you ordinarily send Concordia a check for $1,000 every year. Instead of writing a check, you instruct your IRA trustee to send us $1,333 (assuming you are in the 25% tax bracket.) If you had withdrawn $1,000 from you account, the tax would have been $333 in a 25% bracket. That $333 now can be used to advance our mission - and you will have increased your support by one-third, all paid for by the IRS. The chart below provides other examples and additional detail.

Giving Through Your IRA
If Your Anticipated 2006 Gift Would Have Been:
$100 $500 $1,000 $5,000 $10,000
Tax Bracket You Can Increase to This Amount - Free - by Giving Through Your IRA
15% $117 $588 $1,176 $5,882 $11,764
25 133 666 1,333 6,666 13,333
28 139 694 1,390 6,944 13,888
33 149 746 1,490 7,462 14,925
35 153 769 1,538 7,692 15,384

To calculate different IRA gift amounts than those shown, simply divide your normal gift amount by 1.0 minus your tax bracket. For example a person in the 28% bracket who usually give $1,200 could give $1,200 divided by 0.72, or $1,667, through an IRA at no additional cost. For unmarried taxpayers, the 15% tax bracket begins at $7,550 of taxable income; 25% at $30,650; 28% at $74,200; 33% at $154,800 and 35% at $336,550. For joint returns, the 15% bracket starts at $15,100; 25% at $61,300; 28% at $123,700; 33% at $188,450; 35% at $336,550.