New tax legislation for conversion from traditional IRAs to Roth IRAs presents a wonderful opportunity for charitable giving.
During 2010, there is no limit to the amount of money you can transfer from a traditional to a Roth IRA, and it no longer matters how much income you earn.
- Traditional IRA: You receive an income tax deduction for your initial contribution and your money grows tax-free inside your traditional IRA account. However, you pay income taxes at your normal rate when you withdraw the money during retirement.
- Roth IRA: You receive no income tax deduction for your initial contributions. Your money grows tax-free inside your Roth IRA account, then when you take your money out of the account, you pay no income taxes at all.
HOWEVER, if you choose to rollover your IRA into a Roth IRA you will need to pay income taxes for this contribution/rollover. You can elect to pay these taxes on April 15, 2011, or count 50% of the extra income in 2011 and 50% in 2012. Seek professional advice to determine how this may affect you.
So what’s the advantage? Conversion to a Roth IRA provides the opportunity to be able to take the principal and any gain out at a later date completely tax-free. This is especially attractive if you believe your tax rates will increase in the coming years, or if you believe the investments within your retirement plan will grow substantially. A gift to ChildFund may allow you to avoid or offset much of the taxes you may owe and in addition you will be supporting our work for the world’s poorest children.
Consider these options:
- Make a charitable contribution in 2010 that will create a deduction that offsets the increased income tax.
AND/OR
- Establish a gift, like a charitable gift annuity, that will pay you income. Some of the gift value may be claimed as an immediate charitable deduction and in addition a portion of the payments to you over your lifetime will be tax free.
Please seek financial advice and contact us to explore planning options that are best for you. We welcome the opportunity to work with you and your advisors on techniques that best achieve your personal and philanthropic goals.
Please contact your ChildFund Regional Representative for more information.
The purpose of this web page is to provide information of a general nature only. ChildFund is not engaged in providing legal or tax advice. Please consult with your attorney or financial advisor when considering a charitable gift of any type.
