The new law has a special rule for 2010, taxpayers can make retroactive IRA charitable donations in January 2011 and have them count toward 2010. Only four days remaining to make this donation.
- You must be at least 70 ½ years old.
- You must be subject to Required Minimum Distribution from your IRA.
- Money is transferred directly from your traditional IRA to approved charities. Rollovers from 403(b) plans, 401(k) plans, pension plans, and other retirement plans do not qualify.
- Annual donations cannot exceed more than $100,000 per individual. Amounts more than $100,000 will be added to taxable income.
- The rollover for 2010 must be completed before January 31, 2011. The rollover for 2011 must be completed between January 1, 2011 and December 31, 2011.
- If charitable deductions are not itemized. IRA rollovers especially benefit the nearly two-thirds of Americans who do not itemize deductions and therefore do not receive a tax benefit for their charitable contributions.
- If charitable gifts already exceed 50% and 30% limits of expected adjusted gross income for 2010. Donor can skip these limits and give more.
- If Social Security income is taxable. By avoiding the recognition of taxable income, the donor may have less of their Social Security income subject to income tax.
- Taxpayers who are forced to take required minimum distributions from their IRAs but don't really need that income without having to count that money on their tax return.
- Residents of Ohio, Indiana, Michigan New Jersey, Massachusetts or West Virginia. These states provide no income tax break for charitable contributions. Consequently, they will save income by giving from their IRA instead of from their checking account.
- Residents of Ohio of other states whose State Return starts with carrying over the federal Adjusted Gross Income from Form 1040. Excluding the IRA charitable donation will reduce your state taxes.
- Future Estate Tax implications. The combination of estate and income taxes on IRA assets can produce an effective tax rate of up to 80%. The Charitable IRA rollover exclusion gives individuals the opportunity to remove up to $100,000 of these assets from their estate with no tax consequences. Spouses can rollover up to $100,000 as well if qualified.