Charitable tax deductions and IRS rules
If reducing your taxable estate is an important estate planning goal, making lifetime charitable donations can help achieve that goal while benefiting your favorite organizations at the same time. Plus, by making donations during your lifetime, rather than at death, you can claim income tax deductions. But some of your charitable deductions could be denied if you don’t follow IRS rules, so it’s important to know the ins and outs of those guidelines — and luckily, we’re here to help break it down.
Avoid overpaying taxes on nondeductible IRA contributions
Tax time is not without its complications. And if, like many people, your traditional IRA holds a mixture of deductible (after-tax) and nondeductible (pre-tax) contributions, it’s important to track your contributions carefully to avoid double taxation of distributions. Why? Because the IRS treats distributions as a blend of pre-tax and after-tax dollars. If you treat distributions as fully taxable, you’ll end up overpaying — and no one wants that! Read on for an example and some other pointers to consider as you navigate your taxes this year.