Last Year for Tax-Free Charitable Donations from IRAs
If you are 70 ½ years of age or older and are considering making a donation to a charity, you may wish to consider the option of making the contribution from your IRA account. For 2011, you can donate up to $100,000 to your favorite charity, provided it is an eligible charitable organization, tax free from your traditional IRA, Roth IRA, or a SEP or SIMPLE IRA. To be considered valid, the distribution from the IRA must be made directly to the charity. It cannot pass through your hands or other accounts. Here are the pertinent facts related to making a donation using this provision of the law:
- The distribution is not taxable and does not add to your income for the year. The advantage is that your income remains low and helps to minimize taxable Social Security income and tax disadvantages associated with higher income.
- There is no charitable donation, as the distribution was tax free. However, this can be a considerable benefit to taxpayers who take the standard deduction and do not itemize anyway.
- If you have not already taken your required minimum distribution (RMD) for the year, the charitable distribution can count toward this year’s RMD. Without congressional action, 2011 will be the last year in which this option will be available.
Last-Chance Opportunity to Deduct General Sales and Use Taxes
For 2011, taxpayers have the option of deducting the amount of state and local income tax that they paid during the year, or deducting their state and local general sales and use taxes as an itemized deduction on their federal income tax return. If a taxpayer elects to deduct the sales and use tax, then the taxpayer may opt to deduct the actual sales and use taxes paid or use the amount indicated in the tables published by the IRS. Certain big-ticket items to be considered: vehicles, motor homes, boats and aircraft, and mobile and prefabricated homes. This choice is currently scheduled to expire at the end of 2011. While Congress has extended this tax provision before, at this time, there is no way to know if it will do so again.
Although the sales tax option primarily benefits taxpayers in states with no state income tax, it can also benefit taxpayers who make big-ticket purchases. Their sales tax deduction may exceed their state income tax deduction when they itemize their deductions. Thus, if you are considering a big-ticket purchase, making the purchase prior to the end of the year may enable you to benefit from a potentially increased tax deduction. If you do plan on deducting sales tax in 2011 and you are paying state income tax estimates, you should avoid paying the fourth-quarter estimate installment until after the first of the year. Paying it in 2011 provides no additional benefit for 2011 on your federal return when electing to deduct sales and use tax.
Henssler Financial believes you should Live Ready. That means taking advantage of tax provisions before they expire. If you have questions about these year-end tax strategies, contact your Tax Consultant. Your Tax Consultant can help you Live Ready now and in 2012.
Disclosures:
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
