Senators Work Out Deal to Extend Charity Tax Breaks

September 17, 2008

Senators Work Out Deal to Extend Charity Tax Breaks

Key Democratic and Republican Senators have worked out a measure to renew and extend several tax provisions affecting charitable giving, including one that allows older donors to get a tax break when they give charities money from their individual retirement accounts.

Until December 31 of last year, donors age 70 1/2 or older were able to transfer up to $100,000 to charity from their individual retirement accounts each year without paying income taxes on the money.

Senators have agreed to renew the provision retroactive to January 1, 2008, and extend it to the end of 2009.

Additional provisions in the legislation would renew and extend other breaks related to charitable giving, including special deductions that businesses may take for gifts of food and donations of books and computers to schools.

The legislation also has provisions that would create tax incentives for charitable giving to help victims of summer storms, tornadoes, and floods in the Midwest.

For example, people who use their cars and other vehicles to provide disaster relief in the Midwest would be able to deduct 41 cents per mile — 70 percent of the current business mileage rate — — through the end of 2008. The rates now are 14 cents per mile for charitable activities and 58.5 cents for business activities.

Volunteers could also exclude from their income reimbursements from charities for use of their vehicles up to the amount of the standard business rate through the end of 2008.

The bipartisan agreement on the legislation was reached between Senate leaders and Sens. Max Baucus, a Montana Democrat who chairs the Senate Finance Committee, and Charles Grassley of Iowa, the committee’s senior Republican. A full Senate vote on the legislation may take place as early as this week.

In May, the House of Representatives passed its version of legislation that would renew and extend many of the same tax provisions, including one for IRAs.

The Senate and House differ over how the provisions should be paid for and would have to agree before Congress could pass final legislation.

— Grant Williams

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