Special Opportunity — Wilton Library
137 Old Ridgefield Road Wilton, CT 06897 Tel: 203-762-3950

Special Opportunity

Pension Protection Act of 2006

The Pension Protection Act of 2006 (PPA 2006) was signed into law on August 17, 2006.

You are eligible to take advantage of this long-awaited, limited time opportunity if:

  • You are age 70 1/2 or older at the time you make your donation;
  • You make an outright gift to a qualified charitable organization, like the Wilton Library Association (gifts to private foundations, donor advised funds, and supporting organizations do not qualify, nor do transfers to charitable lead trusts, charitable remainder trusts, gift annuities, or pooled income funds);
  • You transfer funds from your IRA by December 31, 2007

 You may give up to $100,000 per year under this new rule and any gift you make in this way will count toward your minimum required distribution. Please note that you must direct the administrator of your IRA to transfer the funds directly to a qualifiied charity. Since IRA accounts generally contain assets that have not been subject to income tax, there is no charitable deduction associated with the gift. Outright distributions to charity from other types of retirement plans, like 401-Ks and 403(b)s, do not quality under the new rule.

Prior to the enactment of PPA 2006, you would have had to report a withdrawal from your IRA as income and then declare an income tax deduction. For some people, such a gift would actually cause an increase in taxes. Under PPA 2006, this is no longer a concern for those who are eligible to take advantagae of the new rule. Now (and until December 31, 2007), if you direct your IRA administrator to transfer assets directly to a qualified charity, you will not recognize income and will not have to worry about increasing your income taxes. If you fit in any of the following categories, this new rule might be especially beneficial for you:

  • You have an overfunded IRA that you and your spouse will not need in your lifetimes and want to avoid the heavy tax burden that results when these assets pass to other family members.
  • You have sufficient income for your needs from other sources, but must still take the required minimum distribution from your IRA.
  • You have already reached your giving limits based on your adjusted gross income (AGI).
  • Your income level causes the phase-out of your exemptions.
  • You do not itemize your tax deductions
  • Additional income would cause more of your Social Security income to be taxed.

 Please note: This summary was prepared as an educational service and is not intended as legal or tax advice. Consult your own legal or tax advisor before making any decision based on this information.