Senate Bill Would Extend IRA Tax Break for Charitable Gifts

The Senate has unveiled a new tax bill that would extend through 2011 a tax break for people who use money from their individual retirement accounts to donate to charity.

The legislation would also extend tax provisions to encourage donations of property, food inventory, books to public schools, and computer equipment for educational purposes.

That break for retirement gifts expired at the end of 2009. As a result, it has been unclear whether IRA gifts made this year would qualify for the tax incentive.

The new legislation would allow eligible gifts made in 2010 to receive the tax break. In addition, any gift made by the end of January 2011 would be treated as a 2010 donation.

The Senate plan would turn into law the tax deal reached this week between President Obama and Congressional Republicans.

The legislation would extend a law that allows people 70 1⁄2 and older to donate up to $100,000 a year from their IRA’s without paying tax on it.

The Senate is expected to approve the tax package easily, but it may face a rockier time in the House, where many Democrats are angry about provisions they consider too generous to the wealthy at a time of serious budget deficits.

Independent Sector, a coalition of charities and foundations, on Thursday urged nonprofit advocates to fight a deal on the estate tax, saying that it would harm charitable giving by taxing so few estates. The estate tax offers wealthy people an incentive to make charitable bequests so they can reduce the tax liability on the assets they leave their heirs.