Congress recently passed and President Obama signed the Protecting Americans From Tax Hikes (PATH) Act, which renews and makes permanent an Individual Retirement Account (IRA) provision that makes it easier for taxpayers to donate to charities and causes about which they feel passionate.
Under the PATH Act, individuals can roll over up to $100,000 per year from an IRA to a charity tax-free. With millions of Americans using IRAs to save pre-tax dollars for retirement, the law will allow taxpayers over age 70½ to give directly to a charity of their choosing without incurring a tax bill.
Many elderly taxpayers have more money in their IRAs than they need for living expenses and long-term care. These individuals have shown an interest in donating the excess funds to charity, but the tax penalty on the withdrawals has discouraged this practice. Therefore, this new legislation is seen as a ground-breaking advancement for local organizations, which work to improve social services and develop positive impacts on their communities in real time.
"(This law) is a win-win-for people who would rather give to charity than pay taxes and for the not-for-profit organizations they choose to support," Dave McGowan, president of the DuPage Foundation, said.
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