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 IT'S TIME FOR A 2011 TAX-CUTTING CHECK-UP
There are several tax breaks slated to end after this year. Make time to review your tax situation now to see if you can take advantage of any of the following to lower your 2011 tax bill:
- The option for deducting state and local sales taxes in lieu of deducting state and local income taxes.
- The above-the-line deduction of up to $4,000 for higher education expenses.
- The above-the-line deduction of up to $250 for classroom supplies purchased by teachers.
- The option for taxpayers 70½ or older to make tax-free contributions of up to $100,000 from an IRA to charity.
Also, don't forget to check your exposure to the alternative minimum tax (AMT) for 2011. The "Tax Relief Act of 2010" increased the AMT exemption amount for 2011 to $48,450 for single taxpayers and to $74,450 for couples. The AMT is a separate tax calculation originally designed to apply only to the wealthy. In recent years, the AMT has begun to hit even middle-income taxpayers.
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WHO SHOULD TAKE ADVANTAGE OF THE IRA CHARITABLE ROLLOVER?
Last year's tax law extended the "charitable IRA rollover" rule through the end of 2011. Taxpayers who are 70½ or older may make tax-free distributions of up to $100,000 directly to a charity from their IRA. The rollover fulfills the required minimum distribution (RMD) rule, and the rollover amount is not included in taxable income.
If you or someone in your family could qualify to make a charitable IRA rollover, should it be considered? Here are some of the situations in which this tax break could be beneficial.
- You have to take the RMD, but you don't need the money and you don't want to pay tax on the distribution.
- You want to give to charity, but you don't itemize deductions so any contribution you make would not be tax-deductible.
- You do itemize deductions, but your charitable contribution deduction would be affected by the 50%/30% of AGI limit.
- Having to include your RMD in income would result in the phasing out of other deductions and credits based on adjusted gross income.
The charitable IRA rollover is a powerful tool for tax planning. But remember, as it now stands, this provision will expire December 31, 2011. |
