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The 2006 Giving Season and the Pension Protection Act of 2006

Note: The following discussion is provided for informational purposes only and is not intended to serve as legal or tax advice. For specific information about the provisions of the Pension Protection Act of 2006 affecting charitable deductions, consult your tax adviser or attorney.

Getting ready to make your end-of-year gifts to charity? You may want to do some research first—the Pension Protection Act of 2006 contained several provisions affecting charitable deductions. Some went into effect this year; others will go into effect in 2007.

Here are brief summaries of the changes that might affect the average taxpayer. Consult your tax adviser or attorney for more details.

  • Contributions Made Directly from IRAs
    In 2006 and 2007, if you are age 70½ or older and have an Individual Retirement Account, you can donate up to $100,000 each year from your IRA to charity. The distribution will not be taxed as income as long as: the charity is eligible to receive tax-deductible contributions, the charity is not a section 509(a)(3) supporting organization, and the withdrawal goes directly to the charity. You do not need to itemize your taxes to take advantage of this provision; if you do itemize, however, you cannot also take the contribution as a deduction.

  • Used Clothing or Household Items
    Used clothing or household items donated after August 17, 2006, must be in "good" condition or better to be deductible. An exception is a gift worth more than $500, which can be of lesser quality but which must be documented with a "qualified appraisal" included with your tax return. For information on determining the fair market value of your donations, see the Salvation Army's on-line guide, or visit your local Goodwill or other charity thrift store.

  • Gifts of Art, Collectibles, and Valuables
    There are new rules for deducting "fractional gifts," i.e., shares of an artwork, collectible, or other valuable, made after August 17, 2006.

  • Start Collecting Those Receipts—for Everything
    Beginning January 1, 2007, you must have a "bank record" or receipt for all monetary contributions you deduct. No more deducting that dollar you put in the kettle or collection plate.
Other provisions affect deductions for conservation easements, conservation contributions and rehabilitation tax credits, façade easements, contributions of vacant land in historical districts, and contributions of exempt use property. Consult your tax adviser or attorney for more information.

Suzanne E. Coffman, December 2006
© 2006, Philanthropic Research, Inc. (GuideStar)

Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.
Topics: Charitable Giving