December 2006 - Henry Vilas Zoo

News Alert For DonersCHANGE IN LAW ALLOWSFOR TAX-FREE WITHDRAWALSFROM IRAFrom August 21, 2006 USA TodayA provision in the pension reform legislationPresident Bush signed last week will make iteasier for older people to donate money in theirindividual retirement accounts to charity. Theprovision, which is effective only for 2006 and2007, allows individuals who are 70½ or olderto take tax-free withdrawals from their IRAsas long as that money goes directly to charity.Ordinarily, when you withdraw money fromyour IRA, it becomes part of your taxableincome for the year. If you donate the moneyto charity, you can deduct the contribution –but only if you itemize on your tax return.Many retirees who no longer pay a lot ofmortgage interest don’t have large enoughdeductions to itemize.Older people who itemize may also benefit,says Mark Joseph, a financial planner forSentinel Wealth Management in Reston, Va.Even if you claim a charitable deduction foryour IRA withdrawal, the rise in your incomefrom your withdrawal can trigger a host ofunintended consequences, from a phaseout ofyour personal exemption to taxes on yourSocial Security benefits.Under the new provision, though, an IRAwithdrawal that’s donated directly to charity isexcluded from your income. You can’t claim thededuction. But you don’t have to worry aboutunintended consequences, either. “It truly issimple, which is so unusual for the tax code,”Joseph says.And there’s another benefit: The withdrawalcounts against your required minimumdistributions for the year. IRA owners who are70½ or older are required to withdraw aminimum amount every year and pay taxes onthe money, even if they don’t need it. Bydonating the money to charity, you can meetthat requirement without incurring a tax bill.The provision is limited to withdrawals fromIRAs. If you have money in a formeremployer’s 401(k) or similar plan, you’ll need toroll it into an IRA before you can make a directcontribution to charity, Joseph says.OTHER PROVISIONS IN THEPENSION BILL COULD AFFECTMUCH SMALLER DONORS. THOSEPROVISIONS INCLUDE:• Record-keeping requirements for cashdonations. Taxpayers who want to deductcash contributions will have to substantiate alltheir donations, even if they’re for smallamounts. In the past, the IRS didn’t require areceipt for cash contributions of less than$250. Starting next year, though, you’ll needto be able to substantiate all cashcontributions with a receipt from the charityor a bank record, such as a canceled check, incase you’re audited.• New standards for donations of used clothingand household goods. Under the new law,you can’t deduct donations of these itemsunless they’re in good condition or better.Excerpts of an article by Sandra Block. Ms.Block covers personal finance for USATODAY. Her “Your Money” column appearsTuesdays.Leave your Legacy...for future generations to enjoythe wonders of the animal kingdom.For all donations, bequests and charitable gifts to the Zoological Society, theproper legal designation is as follows:Henry Vilas Park Zoological Society,606 S. Randall Ave, Madison WI, 53715Tax Identification Number 39-6077008By including the Zoological Society in estate planning, donors realize a host oftax advantages while helping ensure that the Henry Vilas Zoo continues tothrive for generations to come. Bequests can be as simple the following:“I hereby give, devise, and bequeath to the Henry Vilas Park ZoologicalSociety the amount of $______ for its exempt purposes.”Please contact the Society office at 608-258-9490 for any additional information.