New option for charitable giving

If you are age 70 1/2 or older, there is another option for you to consider when making charitable contributions. Beginning after December 31, 2005, you may be allowed to make a charitable contribution of up to $100,000 of distributions from your IRA. Although there is no charitable contribution deduction allowed,

you are not required to include the distribution in your income for the year the donation is made. This option is limited and may not be the best option for some taxpayers. First, the charitable contribution distribution is allowed from 2006 through 2013, with the maximum contribution limited at $100,000. The taxpayer must be over the age of 701/2 and currently taking his or her required minimum distributions. Only the distributions that are otherwise required to be included in income are eligible for the charitable contribution distribution. The distribution must be made to the charity by a trustee directly to the charity. This means that a distribution that is made to the IRA owner and then turned over to the charity, does not qualify.

Using this option to reduce the balance in your IRA can be a valuable estate planning tool. The value of your IRA is required to be included in your estate at death. Currently estates with a value in excess of $5 million are subject to estate tax. Contributing some of your IRA to a charity while you are still living is an effective way to reduce your taxable estate.

Tax Tips Small Business

  • Thinking of Selling Your Corporation?

    Carefully review your options before making a decision

    When it come time to sell your corporation, you have two options. You can either sell the corporation stock or have the corporation sell the assets and distribute the proceeds. The tax implications of the two sales are very different. If you choose to sell the stock, you are the seller. The corporation is not affected by the transaction. The new owner steps into your shoes as the shareholder and takes over the existing corporation. If your share of the proceeds exceeds your basis in the stock, you'll have a capital gain to report on Schedule D.

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Small Business Quick Tip

  • Personal Use of Vehicle

    If your business owns a vehicle that is available for an employee's personal and business use, the vehicle is nevertheless considered used 100 percent for business on the business tax return. The personal-use percentage is included on the employee's W-2 as additional compensation.
Sunday, 17th December 2017
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Tax Tips Personal

  • Refinancing Your Home Mortgage

    What's deductible and what's not?

    While there are benefits to refinancing your home mortgage, most refinancing costs are not deductible on your tax return. There is one exception, however. The amount you pay for points, or prepaid interest, may be amortized over the life of your new loan. Although this might not amount to much when you spread it out over 15, 20, or 30 years, don't file away your closing papers quite yet.

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Personal Quick Tip

  • IRA for Children

    If your child has earned income from a summer job, you may want to consider opening an IRA for him or her. There is no minimum age for contributing to an IRA. The only requirement is that the person making the contribution has earned income and has not reached age 70 1/2.