Last year, there were a lot of articles about making tax-free donations from an IRA to a charity. Can we still do that this year?

Yes you can, but you need to act quickly. The Pension Protection Act of 2006 allowed people 70½ and older to transfer up to $100,000 per year from their IRAs to a charity and avoid paying income taxes on the money.

But there's a catch: The law allowing these tax-free transfers expires at the end of this year. It may be extended to future years, but its fate is uncertain at this time. So if you're over age 70½ and had been thinking of making a big charitable contribution, you may want to make your move before December 31 so you can benefit from this tax break.

The charitable IRA transfer can be valuable for retirees who need to take required minimum distributions from traditional IRAs because it allows them to dodge a big income-tax bill on their withdrawals if their accounts have increased significantly in value through the years.

However, ff you make a tax-free transfer from an IRA, you can't write off the gift as a charitable contribution, too. The IRS won't let you double-dip the tax benefits. But this IRA gift is particularly helpful for people who want to make a charitable contribution but don't itemize and otherwise can't deduct the gift, which is the case for many seniors who paid off their homes and are taking the standard deduction.

Another benefit: The contribution counts as your required distribution but isn't included in your adjusted gross income. Being able to exclude this money from your income could help you fall below income cut-offs for certain tax breaks and could reduce the tax bill on your Social Security benefits.

Talk with the IRA trustee and the charity about the procedure for making the transfer and what documentation they'll need to provide for tax purposes.

For more information about calculating your IRA required minimum distributions, see IRS Publication 590.

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