By Jerry Love
In mid December, Congress passed a tax bill that prevented major tax hikes for 2011. The legislative act also extended unemployment benefits and offered a temporary reduction in payroll taxes for this year, while several of the provisions impact charitable gift planning. The bill provided only temporary extensions of the provisions included and these issues will be addressed again in 2012.
In addition to holding individual tax rates steady, the major issues for gift planning are recapped here courtesy of excerpts from PGCalc.com’s January e-newsletter.
Extension of the charitable IRA rollover.
The charitable IRA rollover allows taxpayers who are 70 ½ or older to make tax-free transfers of up to $100,000 per year from a Traditional IRA or Roth IRA directly to charity. It originally went into effect for 2006 and 2007, and then extended through 2009.
The new law extends the charitable IRA rollover for two years, retroactive to January 1, 2010, through December 31, 2011. The new law allows donors to elect to treat IRA rollover gifts made before January 31, 2011 as if they were made on December 31, 2010.
Temporarily repeal the itemized
deduction limitation.
Since 1991, the amount of itemized deductions that a taxpayer may claim has been reduced if their adjusted gross income exceeds a certain amount. This limitation on itemized deductions was repealed for 2010, but would have returned in 2011. The repeal of this limitation has been extended through 2012. This repeal means that donors who itemize and are in higher income levels will be able to use more of their charitable deductions.
Estate, gift, and generation skipping
taxes in 2011 and 2012.
Estate and generation-skipping transfer taxes have been phased out over the past six years and were fully repealed in 2010. Meanwhile, the gift tax rate was reduced to 35 percent and the gift tax exemption maintained at $1 million for 2010. As mentioned above, the new tax law sets the exemption at $5 million per person and $10 million per married couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes, effective through 2012. The new rates and exemption are effective January 1, 2010, but executors may elect to choose no estate tax and modified carryover basis for estates arising anytime during 2010.
The new law also allows the executor of a deceased spouse’s estate to transfer any unused estate tax exemption to the surviving spouse without using complex trusts as in past years. The provision is effective for estates of decedents dying after December 31, 2010.
For information regarding tax consequences of charitable giving or making gifts to Baptist churches and ministries, please contact the Louisiana Baptist Foundation at 1-877-523-4636 or log on to www.LBFinfo.org.