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IRA charitable rollover Jan. 31 deadline

IRA owners age 70½ got a tax benefit back when the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law last Dec. 17.

They once again could transfer money, up to $100,000 a year, from their tax-deferred retirement accounts to qualified charities.

This option had expired at the end of 2009. The new tax law retroactively reinstated the option for 2010 as well as extended it for 2011.

Such a direct rollover is appealing to IRA owners who must take required minimum distributions (RMDs) from their accounts, but don't need the money to live on. By giving the required withdrawal amount directly to a charity, they meet the RMD rules and avoid steep penalties.

And because they don't actually take possession of the money, they don't owe taxes on it.

Since the tax bill extending the IRA-to-charity option was signed so late in 2010, the IRS issued a new rule about the rollovers. A direct distribution could be made by Monday, Jan. 31, and count toward the 2010 tax year.

You can read more about the rollover option and the impending 2010 deadline in my Bankrate Taxes Blog item IRA charity rollover returns.

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