November 22, 2014


Retiree charity - Full deduction favored

By Todd Cohen Efforts to increase the tax deduction for retirees who take money from their retirement plans to make charitable contributions are being closely watched by backers who hope support by President Bush will translate into congressional approval for the change. The proposed change, which supporters believe could prompt a surge in charitable giving, is favored by the tax-writing committees in Congress but has failed to win approval in each of the past two sessions. Backers include a loose coalition representing higher education, community foundations, health care, charities and the planned giving community. Current tax rules, which limit itemized deductions, require retirees to treat as taxable income any funds they withdraw from a retirement plan and contribute to charity. Current rules also give no deduction to non-itemizing retirees -- whose only source for making charitable contributions may be their retirement plan. The proposed change, which would increase to 70˝ years from 59˝ years the minimum age of eligible taxpayers, would give retirees in both cases the equivalent of a full charitable deduction. Under the proposal, funds taken from a retirement plan and donated to charity would not be considered income for tax purposes. And non-itemizers could instruct their retirement plans to write checks to charities directly from their accounts, thus avoiding having to report it on their tax returns. While no estimates are available on the level of contributions that the change might generate, said Matt Hamill, senior associate at the Institute for Higher Education Policy in Washington, D.C., “it seems that current law is prohibiting a fairly significant amount of charitable giving.” Jeffrey Comfort, director of planned giving at Georgetown University and immediate past president of the National Committee on Planned Giving, said that, if passed, the potential legislation “could have a huge impact on charities and donors and could be the most important tax legislation impacting philanthropy in recent history.”  


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