Tax Tricks that can Support the Engineering Foundation of St. Louis.

Are You at least 70-1/2? Are you looking for ways to reduce your taxes? Do you have an IRA?

If you answered "yes" to these questions, there is a way for you to help support the Engineering Foundtion of St. Louis and save on taxes.

Here's How it Works:
The IRS will allow you to make a donation of up to $100,000 in 2008 & 2009 to an IRS-approved charity directly from your IRA while still satisfying your Required Minimum Distribution (RMD). You will reduce your income for the tax year and not incur the 50% penalty for not satisfying your RMD in that year. This tax break is only available if you've reached age 70-1/2 by the end of the applicable year. If you don't use the full $100,000 privilege for 2008, you can't carry over the difference to 2009. You will not be able to take a charitable deduction on your taxes for such a distribution. The IRS is allowing you to forego taxes. They're not going to allow you to take a deduction too!!

Important Considerations: This provision in the tax code only works if the money distributed to the IRS-approved charity comes straight from the financial institution where the IRA is held to the charity. If you instruct the financial institution where the IRA is held to issue a check directly to you and you in turn issue a check to the charity, the whole provision is blown because the IRS will treat the distribution as ordinary income to the IRA holder.

Example:
Let's assume you turn 72 in 2008, you have an IRA worth $500,000 on December 31, 2007, you are single, and expect to earn $65,000 from sources other than your IRA. Since you are over age 70-1/2, you must take $19,531.25 as your RMD from your IRA by December 31, 2008. If you take the full distribution to yourself, you will have to pay taxes on $84,531.25 as earned income (e.g.
$65,000 + $19,531.25). This level of earned income will force you from the 25% tax bracket into the 28% tax bracket.

Let's say you don't need or want the extra income associated with your IRA distribution. If you instruct the financial institution where your IRA is held to distribute the full $19,531.25 directly to an IRS-approved charity (e.g. Engineer's Club of St. Louis), you will forego that income for the tax year. This will reduce your tax bill by allowing you to remain in the 25% tax bracket. You also will satisfy your RMD for the tax year so you don't incur the 50% penalty (e.g. $9,765.63 in this example) for not satisfying your RMD.

This is a great way to help support the programs of the Engineering Foundation of St. Louis. If you are interested in taking advantage of this opportunity, please contact the financial institution where your IRA is held for the paperwork to facilitate the distribution. Please instruct them to make the check payable to:

The Engineering Foundation of St. Louis
4359 Lindell Blvd
St Louis, MO 63108

Note: If you decide to have a portion (amounts less than 100%) of your RMD distributed to an IRS-approved charity, you will still have to distribute the difference of the RMD (up to 100%) to yourself. If you do not satisfy the full RMD, you will incur a 50% penalty on any amounts less than the full RMD for that calendar year.

This information contained herein is for informational purposes only and does not constitute tax advice. Please consult your tax professional for any specific questions about your unique tax situation regarding this opportunity.

Thank you for your generous consideration,

The Engineers' Club of St. Louis

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