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Converting to a Roth? Give to charity, too

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in Small Business Tax,Small Business Tax Deduction Strategies

Depending on your situation, it may make sense to convert funds in a traditional IRA into a Roth IRA this year, with the promise of future tax-free payouts. But you might have a problem paying the current tax due on the conversion.

Fortunately, there’s a way to offset the tax liability without reaching into your wallet.

Strategy: Make a sizable donation of appreciated property to charity. Generally, you can deduct the full fair market value of the property on this year’s return if you’ve owned it for more than one year.

In this case, the charitable deduction may reduce the Roth conversion tax bill or eliminate it completely.

Here’s the whole story: As opposed to a traditional IRA, contributions to a Roth IRA are never tax deductible, but qualified distributions from a Roth in existence at least five years are 100% tax-free. Qualified distributions include those made after reaching age 59½, on account of death or disability o...(register to read more)

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