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All posts tagged ira distribution

Did you know there is an order for how withdrawals are taken from Roth IRA accounts? Even if you have 10 different Roth IRA accounts, for tax purposes, they are considered one account. The IRS says that distributions MUST be withdrawn in a specific order, and that order applies regardless of which Roth IRA is used to take that distribution. These distributions should be made in the following order:

  1. From non-taxable annual contribution to a Roth IRA (other than conversion amounts)
  2. From conversion contributions, on a first-in, first out (FIFO) basis
  3. From earnings.

You ask why this matters…click here to read the entire article.

If you are planning on giving all or part of your required minimum distribution from your IRA to a charity this year, you may want to hold off until toward the end of the year as Congress has not reauthorized the law that allows this tax break.  The law that allows people over 70 1/2 to make a tax free transfer of up to $100,000 directly from their IRA to a charity has not been passed for 2012, but Congress typically does not reauthorize tax breaks until toward the end of the year.

If this is something you are interested in, please be aware that the money must be transferred directly from the IRA to the charity.  If you take the cash out now, you will have to add those monies to your gross income.  Keeping it out of your adjusted gross income will help many people stay below the income limit for other tax breaks and avoid the Medicare high-income surcharge. 

For more information about RMD’s see Rules for Required IRA Distributions.