A great new option for charitable giving is available

THE STATE WE’RE IN

By Michele S. Byers
   For many of us, the holidays are almost over, but for some, the "spirit of giving" is still alive. And for the latter, there’s still time to maximize tax savings through charitable giving.
   Most readers will be at least partially familiar with the tax benefits of making charitable donations. And while charities that provide direct service to people in need often spring to mind most quickly, the work of preserving land contributes greatly to the quality of life of all residents.
   This year, donors have a great new option for charitable giving, for a very limited time. The Pension Protection Act of 2006 provides tax incentives for donors age 70½ or older to contribute IRA (individual retirement account) assets to public charities, including land trusts. Qualified donors may contribute up to $100,000 a year from regular or Roth IRAs without paying federal income taxes on the distributions. Gifts will even qualify toward required minimum IRA distributions. Donations must be in the form of outright gifts to qualify as opposed to something given in trust, for example.
   In the past, donors wanting to make this type of gift would first have to withdraw the funds from their IRA and then make the donation. This might first create a penalty, but would also add an IRA withdrawal to their taxable income. And although the donors would be allowed to deduct the donation, other factors in personal tax liability would often result in a deduction smaller than the gift.
   Under the new provision, gifts go directly from the donor’s IRA administrator to the designated charities. The tax break applies to gifts received by charities by Dec. 31, 2007, so interested donors have only two tax years (2006 and 2007) to take advantage of this opportunity.
   But this new tax provision is only one way to give. Other ways of giving include:
   • Donating appreciated securities held for more than a year, with the possibility of a full fair-market-value deduction and without capital gains tax.
   • Donating land. Open spaces and farmlands are all candidates for preservation.
   • Donating conservation easements. Important tools in land preservation, conservation easements are restrictions placed on lands to permanently protect their natural, agricultural and scenic resources.
   • Selling land for preservation at below market values. The partial donation also qualifies as a charitable gift.
   Congress also expanded the federal tax incentives for donating conservation easements. Landowners can now take a tax deduction for easement donations up to 50 percent of their income, as compared to 30 percent under previous law, and qualifying farmers can actually deduct up to 100 percent of their income. The tax incentives apply only to donations made in 2006 and 2007, although the conservation community is working to make them permanent.
   Consulting your financial and tax advisers now gives you time to make adjustments before the end of the year. And you will find most open space and farmland preservation groups are flexible and creative in working with donors because their generosity can benefit the public in so many ways. So enjoy the holidays and get into the "spirit of giving."
Michele S. Byers is executive director of the New Jersey Conservation Foundation. For more information, contact her at [email protected] or visit NJCF’s Web site at www.njconservation.org.