As part of the recently passed tax extensions, Congress extended, once again, the popular IRA rollover to charity provision – but with a twist.
If you are 70 ½ or older you can directly rollover up to $100,000 to charity for tax year 2010 – that didn’t change. While you don’t have to pick up the IRA distribution in income, you don’t get a charitable deduction for the distribution. The amounts distributed also count toward your required minimum distributions for 2010.
So what’s the twist?
Since Congress passed the change so late in the year, taxpayers can make a rollover in January 2011 and count it toward their 2010 distributions. The benefits of doing the rollover still apply: since the amount distributed isn’t included in income, you aren’t subject to percentage limitations on the charitable gift. You may be able to avoid certain penalties that come with a higher adjusted gross income, such as higher Medicare premiums.
If you haven’t made all of your required minimum distributions for 2010, or if you discover that you haven’t after December 31, 2010, this new provision may be of use to you.
There were also substantial changes to the way the federal gift and estate tax work, so you may want to talk to your attorney, financial advisor or accountant to determine if the rollover still makes sense to your overall estate plan.
The IRS hasn’t specified how to make the election for the January 2011 distributions, but your accounting professional can help you through the process once guidance becomes available.