Tax Savings Opportunity for 2005 Year-end Gifts!
KETRA, a temporary tax relief act recently went into effect and contains some key provisions that may benefit donors who wish to make a substantial charitable gift to the Cystic Fibrosis Foundation by December 31, 2005.
Under current tax law, itemized deductions for gifts of cash and certain other property are limited to 50 percent of the donor’s Adjusted Gross Income (AGI) each year. KETRA temporarily suspends this deductibility ceiling for any cash gift made between August 28 and December 31, 2005. In addition, the provision of the IRS code that requires itemized deductions be reduced by 3 percent of the amount by which AGI exceeds $145,950 ($72,975 for married persons filing separately) also is waived.
KETRA applies only to gifts of cash and does not apply to gifts of appreciated assets, such as stock. Gifts to donor-advised funds, supporting organizations, private foundations and most charitable remainder trusts and certain other life income plans are specifically excluded. However, cash gifts to charitable gift annuities and gifts from IRAs and other qualified retirement plans appear to qualify.
Here are some giving scenarios you may wish to consider if making a year-end contribution to the CF Foundation.
If you would like to make a substantial cash gift to the CF Foundation, or have an outstanding pledge, KETRA may allow you to pay off your pledge or make your cash gift and take the full deduction, without limitation, this year.
- If you have excess funds in your IRA or other qualified plan, or you have already assigned it to the CF Foundation upon your death, you may want to consider withdrawing funds and making a cash gift to before year-end. Although such a withdrawal would increase your AGI, your charitable deduction would not be subject to the 50 percent ceiling in 2005.
- If you are considering funding a charitable gift annuity, you can make a cash gift to a gift annuity before December 31, 2005 and use the full deduction without limitation this year.
- If you have any stock losses, you may want to consider selling the stock, deducting the losses to the extent allowed, and gifting the cash proceeds to the CF Foundation, without limit on your gift deduction.
To take advantage of KETRA, your cash gift to the CF Foundation must be made between August 28 and December 31, 2005. You may contact the CF Foundation’s Office of Major and Planned Giving at (301) 951-4422 or firstname.lastname@example.org.
Be sure to consult your financial or tax advisor before making any material decision based on this information.
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