401k to charity

You might be thinking of the rule that allows up to $100,000 lifetime to be transferred from your IRA to a qualified charity, and not having to declare that IRA distribution as taxable. That expires 12/31/09.

But there is not a similar rule for a 401k. If you are able to first transfer the 401k into an IRA, then you could proceed as above. But if you're still working for the company where you have your 401k you may not be able to make a transfer to an IRA.

You can't avoid the early withdrawal penalty because it gets added to your calculated taxes in a section on the 1040 called Other Taxes.

As to whether your additional charitable contributions deduction offsets the tax on the additional pension income depends upon whether the amount of additional charitable contributions all flow to the bottom line of Schedule A. There are limits on the amount of charitable contributions that can be deducted. In addition, itemized deductions start to phase out when your income gets too high.

OP indicated concern about the premature distribution penalty, which leads me to believe he's not 70 1/2, and the QCD provision wouldn't apply to him.

Phil Marti Clarksburg, MD