Create Deductions When You Convert to a Roth IRA

Starting next year, anyone with a conventional IRA can convert to a Roth IRA and guarantee that future withdrawals will be free of income tax – both for themselves and their heirs. (This year your adjusted gross income must be under $100,000 to make the switch.) Disadvantage? Funds transferred from traditional IRAs are treated as taxable income.

The decision to convert to a Roth IRA depends on a variety of factors, and you should consult your advisers. But you might find the timing right for a charitable gift that would offset, in whole or in part, the cost of converting to a Roth IRA. Annual donors might consider “bunching” four or five years of future gifts into one large contribution in the year of a Roth IRA conversion. Donors who have carryover deductions from past years’ gifts can use up more of their old deductions when they convert to a Roth IRA. And you might want to consider arranging a gift that pays you lifetime income – and provides a significant deduction. Your income can start immediately, or be deferred several years into the future, resulting in larger deductions.

Please call our office if you would like more information on planning for large charitable deductions – for any purpose.

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