Switch to a Roth IRA – One way to make lemonade out of your IRA lemon is to switch your traditional IRA to a Roth IRA. Why? You can earn a smaller tax bill and set yourself up for some tax-free retirement income down the road. Here’s the skinny: To convert to a Roth IRA, your adjusted gross income can’t exceed $100,000 annually, no matter if you’re single or married. If you can convert by December 31, you’ll only owe the IRS on taxes at your regular tax rate on the amount converted to an IRA. The move enables investors whose traditional IRA’s that were hit hard by the stock market tsunami of 2008 to move to a Roth IRA at a lower tax rate than you would have paid from your old IRA.
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New charitable contribution tax break – I know, following changes in the tax laws is like a root canal. But doing so can save you money. Take the new rule that lets IRA investors directly transfer – tax-free – up to $100,000 annually to an approved charity. The new rule applies to IRA holders regardless of whether or not you itemize deductions on your taxes. Any funds contributed directly from your IRA to a charitable group (careful, some groups like donor-advised funds, aren’t eligible) are okay by Uncle Sam. As the IRS Publication 590 puts it; “Amounts so transferred are not taxable and no deduction is available for the amount given to the charity.” For more detail, visit the IRS Publication 590, Individual Retirement Arrangements (IRAs), on qualified charitable distributions. Find it under “Are Distributions Taxable?”
