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December 14, 2007

A key tax break for charitable-minded taxpayers is scheduled to expire at the end of this year. If you are over age 70 1/2, you are eligible to transfer up to $100,000 from your IRA directly to charity.

Such a transfer is better than taking the money from the IRA and writing a check to charity because the funds don't run through your tax return. Your AGI isn't increased, so you don't lose itemized deductions; also, the contribution isn't affected by the tax law's limit of charitable deductions to 50% of AGI.

For taxpayers with enough net worth to be tsubject to the estate tax, giving away IRAs to charity has two benefits: it avoids estate tax on the donated funds, and it avoids income tax to the beneficiaries.

If you want to make this donation by year-end, you should act right away; the IRA custodians need some time for their paperwork.

This is part of our daily series of posts on 2007 year end tax planning that will appear through December 31. Collect them all!

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