Act fast: the fiscal cliff deal has a special tax break for cash donated by seniors to charity in Jan. 2013.
If you are past age 70-1/2, you probably already know that you must take required minimum distributions (RMDs) from your traditional IRA, and that you must pay income taxes on those distributions (this does not apply to Roth IRAs). What you may not know is, if you are charitably inclined, the American Taxpayer Relief Act(commonly referred to as the Fiscal Cliff Deal) allows you to avoid income taxes by directing those RMDs to a qualified charity with an IRA Charitable Rollover. The rule applies for 2013, and includes a small window of opportunity for 2012 donations as well.
If you’re unsure how this affects your broader financial and charitable planning, it may be wise to consult an estate planning attorney to ensure your donations maximize tax benefits while aligning with your long-term estate goals.
We have had this deal before, but Congress let it expire at the end of 2011. So, it’s likely that most people already took their 2012 RMDs, as required by law, before December 31st. If you didn’t, though, Congress has given you until January 31st, 2013 to make a charitable contribution that can satisfy all or part of your RMD for 2012. Confused? You may want to read more about it in the Forbes article, “Fiscal Cliff Deal Allows Giving IRA Assets to Charity.”
