Older Taxpayers and Tax-Free Donations

To qualify, gifts must be made before January 1, 2008

[The following financial information provided by members of our Planned Giving and Contributions Committee to help you support the mission of Loyola High School. Committee members: Michael Flynn, Michael J. Lopus, R. Peter Prokop, and David W. Sommerfeld]

When it comes to making contributions to Loyola High School, older taxpayers have a new advantage: IRA gifts can now be made without all the tax ramifications they used to have. Additionally, by giving now, older donors can see, firsthand, the benefits of their generosity. The Pension Protection Act of 2006 Act allows people age 70-1/2 and older to make tax-free cash gifts from their traditional or Roth IRA totaling up to $100,000 a year to public charities such as Loyola High School. This tax-free roll-over is effective for “qualified charitable distributions” made before January 1, 2008.

This legislation is good news for people who want to make a charitable gift during their lifetime from their retirement assets but who have been discouraged from doing so because of the income tax penalty. IRA assets can have a substantial income tax and estate tax penalties attached to them.

WHAT THIS MEANS FOR THOSE IN THIS AGE BRACKET:

Under the old rules:
A lump-sum distribution from an IRA, given as a charitable gift, was included in the person’s adjusted gross income (AGI) and, accordingly, subject to taxation for both federal and Michigan purposes. The corresponding federal charitable contribution deduction for a gift to Loyola was limited to 50%of the AGI,and there was no corresponding Michigan income tax deduction.

Under the new rule:
A lump-sum distribution from an IRA, given as a charitable gift, is not included in AGI, therefore not subject to taxation for either federal or Michigan purposes. However, there is no up-front income tax deduction for a charitable gift; but none is needed since the distribution was not included as income.

For example, suppose 73-year-old John has a $600,000 IRA and wants to support the work of Loyola High School in 2007. Under this new law, John can direct his IRA administrator to directly transfer $50,000 from his IRA to Loyola.

This transfer creates at least three tax consequences for John:

1) He will not have to report this distribution as income on his federal and Michigan tax returns (but he cannot claim a charitable deduction from this gift);

2) The $50,000 transfer reduces his required minimum distribution amount for 2007; and

3) His gross estate for federal estate tax purposes is reduced by $50,000. If John has a spouse 70-1/2 or older, she also can make a gift from her IRA in 2007 and 2008.

Of course, since state and local tax laws may differ regarding the inclusion of an IRA distribution in taxable income, potential donors should consult their personal legal and financial advisors before making a gift from their IRA.

No matter what your age, year-end giving can result in tax savings. However, the gift date is crucial. Your gift must be made before January 1, 2008. So your check must be dated on or before this date; gifts by credit card must be authorized on or before this date; a stock gift must be credited to Loyola’s account by this date.

There are several ways to make a year-end gift:
1. Send your check to Loyola's Development Office (payable to Loyola High School).
2. Donate online on this page.
3. Or call us at 313-861-2407 x103 with your credit card information.

If you'd like to talk with a member of Loyola's Planned Giving Committee, please call the Development Office at 313-861.-2407 x103 and Kitty Storen will help you get in touch with one of those members.

To donate securities, just call us at the number above and we will provide you with the necessary information. If you have appreciated securities held more than one year, you can claim a deduction equal to the fair market value. If your securities are worth less now then when purchased, you can take a capital loss on your tax return by selling them and contributing the proceeds. Remember: when making gifts of securities,we recommend you consult your financial advisor to determine your tax consequences.

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