Tax law update

I had planned to take most of Advent off from writing this blog, but since I have all of my shopping done I thought I’d update you on the recent tax changes signed by the President.

I think the biggest Christmas gift we were given was an extension of the IRA Rollover.

For most people their IRAs are their single largest pockets of cash they have.  As a quick review I will remind you that while you are working you are not taxed on the money you put into your IRA, but when you withdraw it, you are taxed.  And just to make sure Uncle Sam gets paid, people over age 70 1/2 are required to take some of it out every year, the required minimum annual distribution.

The IRA rollover allows your members to make a gift out of their IRA to give it to the church (or other qualified charity) and not pay tax on it.  And this transfer counts toward the required minimum annual distribution.

But wait it gets better.  If they do a charitable distribution before January 31 of 2011 the IRS will pretend that it happened in 2010.

The IRA rollover first came into being after Hurricane Katrina and Congress has turned it on and off every two years ever since.  The current incarnation is in effect only until the end of 2011.

There is, of course, small print but it’s not too bad.  The check must be written directly from your plan administrator to the charity and while those with Roth IRAs will be able to participate there will not be the same tax advantages.  Each individual can give up to $100,000 per year to charity pe year.

So what does this mean?

  • It means that even people who don’t itemize on their taxes (and the vast majority of your retired members do not) still get tax benefits for making a gift;
  • The dreaded annual distribution that people have to take even if they don’t want or need to withdraw the money can be accomplished in a way that does not make them have to pay taxes;
  • For the next 54 weeks your older members have a great way to pay their annual pledge, capital campaign gift or even make a gift to your endowment fund;
  • This opens the door to have a conversation even with people whose last names are not Gates or Rockefeller about tax-wise giving to support the mission of the church.

Right after the first of the year the Foundation will have bulletin inserts and other information you can use to share this news with your members.

This is a great opportunity for your members and I hope you will help them take advantage of it.

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