Tax-Free Distributions to Charities from an IRA
An individual who has attained age 70 1/2 may make tax-free IRA distributions directly from his/her IRA to a charitable organization. The rule limits the tax-free distributions to $100,000 per year, is effective immediately, and only applies to distributions made through December 31, 2007 Tax Planning Note: This can be a tremendous savings for those who might be subject to adjusted gross income limitations had they taken the donation to charity as an itemized deduction.
Your Tax Refund can be put into an IRA
An individual can now direct all or a portion of any tax refund directly to an IRA. At this time we are not sure whether an individual could make a prior tax year contribution with the refund. Tax Planning Note: This is effective for tax years beginning 1/1/07 and includes tax-year 2006 refunds received in 2007.
Rollover Provision for a Non-spouse Beneficiary
Previously, only a spouse beneficiary had the right to roll inherited employer plan assets to a personal IRA. The new legislation provides a similar rollover right to non-spouse beneficiaries allowing him/her to roll inherited employer plan assets to an inherited traditional IRA and take distributions under the Internal Revenue Code (IRC) 401(a)(9)(B) beneficiary rules. This provision is effective for employer plan distributions after December 31, 2006. The plan participant's date of death does not affect the availability of this rollover provision.
Rollover of Employer Plan Assets directly to a Roth IRA
Previously, the rules did not allow an individual to convert his/her employer plan assets directly to a Roth IRA. The new law will allow an individual to directly roll distributions from certain employer plans to a Roth IRA using conversion eligibility rules.
Penalty-Free Distributions for a Qualified Reservist in active duty
The legislation allows a qualified reservist, called to active duty between September 11, 2001 and December 31, 2007 for more than 179 days (or for an indefinite period), to take penalty-free distributions from his/her IRA while on active duty. This rule applies to distributions after September 11, 2001.
401(K) Contribution Limits
For 2006 the maximum deferral into a qualified 401(K) is $15,000, however taxpayers over 50 years old can make voluntary catch up contributions up to $5,000 more for a total contribution of $20,000.
Traditional IRS Limits
In 2006 and 2007, the maximum contribution to a regular IRA is $4,000. For 2008 and after, the maximum contribution is $5,000. However, taxpayers 50 and over can make catch up contributions of $1,000 for a maximum 2006 contribution of $5,000. Phaseout for IRA deductions begin at $50,000 for single individuals and is fully phased out at 60,000. For married individuals filing jointly and qualifying widowers, phase out begins at $75,000 and is fully phased out at $85,000.
