Fiscal Cliff Law Extends Ira Donation Tax Break Can You Benefit-candy boy

Taxes If you’ve reached 70 1/2 and have more IRA money than you really need, the recently passed fiscal cliff legislation allows you to make cash donations to IRS-approved charities out of your IRA. These so-called qualified charitable distributions (QCDs) have been allowed in past years, but the privilege expired at the end of 2011. Thankfully, the new law retroactively brings them back for 2012 and extends them for 2013. However you must take action by January 31, 2013 to benefit from the retroactive options for 2012. Basics on IRA Qualified Charitable Distributions Qualified charitable distributions (QCDs) are allowed to be taken out of your traditional IRA without owing any federal in.e tax. In contrast, other traditional IRA distributions are taxable. Unlike garden-variety charitable donations, you can’t claim itemized deductions for QCDs. That is okay, because the tax-free treatment of QCDs equates to a 100 percent deduction — because you’ll never be taxed on those amounts, and you don’t have to worry about any of the tax-law restrictions that apply to itemized charitable write-offs. A QCD must meet all of the following requirements. It must be distributed from an IRA, and it cannot occur before you, as the IRA owner or beneficiary, are 70 1/2. It must meet the normal tax-law requirements for a 100 percent deductible charitable donation. If you receive any benefits that would be subtracted from a donation under the normal charitable deduction rules, (such as tickets to an event), the distribution cannot be a QCD. Beware of this rule! It must be a distribution that would otherwise be taxable. A Roth IRA distribution can meet this requirement if it’s not a qualified (meaning tax-free) distribution. However, making QCDs out of Roth IRAs is generally inadvisable for reasons explained later. Annual Limit of $100,000 There’s a $100,000 limit on total QCDs for any one year. But if both you and your spouse have IRAs set up in your respective names, each of you is entitled to a separate $100,000 annual QCD limit, for a .bined total of $200,000, even if you file jointly. Tax-Saving Advantages There are at least four potential tax-saving advantages to this strategy. 1. QCDs are not included in your adjusted gross in.e (AGI). This lowers the odds that you will be affected by various unfavorable AGI-based rules, such as those that can cause more of your Social Security benefits to be taxed, less of your rental estate losses to be deductible, and more of your investment in.e to be hit with the new 3.8 percent Medicare surtax. QCDs are also exempt from the rule that says your itemized charitable write-offs for the year cannot exceed 50 percent of your AGI. 2. A QCD from a traditional IRA counts as a distribution for purposes of the required minimum distribution rules. Therefore, you can arrange to donate all or part of your 2013 required minimum distribution amount that you would otherwise be forced to receive and pay taxes on. 3. Let’s say you own one or more traditional IRAs to which you have made non-deductible contributions over the years. Your IRA balances consist partly of a taxable layer and partly of a nontaxable layer. Any QCDs are treated as .ing straight from the taxable layer. Any non-taxable amounts are left behind in your IRA(s). Later on, those non-taxable amounts can be withdrawn tax-free by you or your heirs. 4. QCDs reduce your taxable estate, although that is less of an issue for most folks now that the federal estate tax exemption has been permanently set at $5 million, adjusted for inflation. The QCD strategy is a tax-smart opportunity for well-off seniors with philanthropic inclinations and more IRA money than they need for retirement. However, the January 31 deadline for the retroactive 2012 options is looming. For the full article, click Here . At HR&P we know what drives your .pany. We have built a reputation on providing exceptional customer service and administrative solutions that help .panies improve productivity and profitability. Please give us a call at 281.880.6525 or visit us HERE and we will be happy to talk to you. About the Author: HR&P has offered the highest quality human resource outsourcing and payroll services to a diverse pool of clients.By processing your payroll, managing your benefits and overseeing your human resource issues, HR&P makes your workforce flexible and able to meet your changing business demands. Our ongoing goal is to continue to develop specific solutions for each client that suit their particular needs. Article Published On: 相关的主题文章: