Taxpayers who are age 70 1/2 or older can make tax-free distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000. These distributions aren’t subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer’s return. These tax-free distributions were made retroactive for 2010 and available as a planning tool for 2011 thanks to the tax bill enacted December 2010. So how do you make a charitable distribution for 2010?
The 2010 Tax Relief Act retroactively extends this provision for two years so that it’s available for charitable IRA transfers made in tax years beginning before Jan. 1, 2012. In addition, a taxpayer can elect for such a distribution made in January of 2011 to be treated as if it were made on Dec. 31, 2010. Thus, a qualified charitable distribution made in Jan. 2011 is allowed to be (1) treated as made in the taxpayer’s 2010 tax year and thus so allowed to count against the 2010 $100,000 limitation on the exclusion, and (2) treated as made in the 2010 calendar year and so allowed to be used to satisfy the taxpayer’s minimum distribution requirement for 2010. However, you must act fast. Those who are interested have 8 business days left to get this done by the end of the month.
If like most people have already made your IRA distributions for 2010 and have closed that chapter of your life, consider this as a great way to save taxes and assist charities for 2011. Save on taxes, help a charitable organization in need, and leave a legacy – sounds like a win, win, win!