Bettendorf, Iowa – When President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 this week, a two-year extension of Charitable IRA legislation was included, making it easier for Americans to give to causes they care about. The Charitable IRA provision, first enacted in 2006, has the power to help local charities strengthen their communities at a time when it is needed most. The extension goes through 2011.

Millions of Americans continue to save pre-tax dollars in individual retirement accounts (IRAs). As of age 70½, you must take withdrawals from your IRA, but those withdrawals are subject to income tax. The extension of the Charitable IRA legislation allows taxpayers 70½ and older to share the wealth by giving retirement savings directly to charity. By going directly to a qualified public charity such as the Community Foundation, the money is not included in the IRA owner’s income and—most important—is not taxed, preserving the full amount for charitable purposes.

Because the bill was passed so late in 2010, IRA holders can transfer funds directly to charities by January 31^st and still apply it to their 2010 taxes.

Iowans have an added incentive to give. Those who choose to transfer IRA assets to charity to take advantage of this national legislation may also qualify for the 25% Endow Iowa Tax Credit. To qualify, these gifts must be given to an endowment fund that will support an Iowa charitable cause that is held by a qualified community foundation.

“It’s a win-win—for people who would rather give to charity than pay taxes and the nonprofit organizations they choose to support,” said Susan Skora, President/CEO of the Community Foundation of the Great River Bend.

Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which reduces the value of the gift. Others are concerned about designating their children as IRA beneficiaries, since that may draw unintended tax consequences.

“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Skora said. “Heirs may receive less than 50% of IRA assets that pass through estates.”

During 2010 and 2011 only, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000 per year. A single person can transfer $200,000 free from federal tax; a married couple can transfer up to $400,000 free from federal tax from separate accounts. The Community Foundation of the Great River Bend can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.

“This really is a limited-time offer: the window is open now, but it will close at the end of 2011,” said Skora. “For anyone interested in establishing a permanent legacy in this community, this is an opportunity to make the gift of a lifetime.”

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