The new Pension Protection Act of 2006 (PPA) has a big tax break for seniors who are subject to RMD (required minimum draws) on their IRAs.  Seniors who reach the age of 70½ must start to take at least a minimum draw from their tax deferred IRAs or face a stiff penalty.

For this year and 2007 the PPA allows these seniors to make a donation to their favorite Charity or to their Church directly from their IRA and not have it count toward the AGI (adjusted gross income).    Your church or charity will get the benefit of the full pretax amount up to $100,000 a year and the amount of the donation will be excluded from deferred income taxes and potential future estate taxes on the amount of you contribution.  This benefit has been extended through 2009.

In addition the transfer isn’t subject to the charitable deduction ceiling (50% of AGI) or the 2% rule requiring that itemized deductions be reduced by 2% of AGI in excess of $150,500 for tax year 2006.  If you want to take advantage of this IRA charitable rollover contact your church or charity for help with the paperwork.

The PPA restricts other charity donations.   This year and prior taxpayers didn’t necessarily need a receipt for contributions under $250.00.  For example, you claim small amounts donated to the Christmas bell ringers.  In 2007 you must have a receipt for every contribution claimed.  You also cannot take credit for clothing and other goods donated to the Salvation Army, Good Samaritan Outreach Center and similar organizations unless they are in “good shape.”