The pension reform bill that President Bush just signed into law will allow those age 70-1/2 or older to donate up to $100,000 a year from their IRAs tax free to charity, USA Today reports. But the window of opportunity to do so applies only to 2006 and 2007, and the donations must be made directly to the charity.
While individuals cannot claim the donations as a deduction, the withdrawals aren't treated as part of their taxable income; withdrawals from IRAs are otherwise treated as taxable income. In addition, the withdrawals count as part of the required minimum distributions for the year.
Two other small downsides, however, are that the provision applies only to IRAs. If a person wants to donate money from their 401(k), they must first roll the money over to an IRA. Also, the provision does not apply to donations to private foundations or donor-advised funds, which often are managed by mutual fund companies and allow investors to decide at a later date which charities are to receive the money.