submitted by the Financial Committee
In order to deduct charitable contributions, taxpayers must have a bank record or a written communication from a charity — including churches — clearly showing the name of the charity and the date and amount of the contribution. The new law enacted by Congress applies for tax years before Aug. 18, 2006. In other words, the change won’t affect most taxpayers’ 2006 returns, but they should retain records of cash contributions made during 2007.
How does the new law apply to members and friends of Christ the King Lutheran Church? If you make a cash contribution for the regular offering or the mission offering, please use one of the envelopes in the pews and write your name on the envelope so the church office staff will be able to provide documentation of your contributions. Bank records such as canceled checks or bank, credit union or credit card statements will satisfy the record-keeping requirement if they show the name of the charity and the date and amount paid. The new law does not change the requirement that a taxpayer get a written acknowledgement from a charity for each deductible donation (either money or property) of $250 or more. The IRS says, however, that one statement containing all of the required information may meet the requirements of both provisions.
New Tax Break for IRA Owners
An IRA owner, age 70 ½ or over, can directly transfer tax-free, up to $100,000 per year to an eligible charitable organization. This option is available in tax years 2006 and 2007. Eligible IRA owners can take advantage of this provision, regardless of whether they itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans are not eligible. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity. Not all charities are eligible under this provision. For example, donor-advised funds and supporting organizations are not eligible recipients. Transferred amounts are counted in determining whether the owner has met the IRA’s required minimum distribution rules. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. If you have any questions about these new provisions, please consult a tax professional.