One of the temporary tax provisions made permanent as part of the tax code in late 2015 is qualified charitable distributions from IRAs for those who have reached age 70½. Unfortunately in 2014 and 2015, the law was extended too late during the calendar year to reasonably use this tax law. In 2016 you have the ability to make a planned decision to use this tax benefit. Here is what you need to know.

The rule. For those age 70½ or older, you can have up to $100,000 of your IRA paid directly to qualified tax-exempt charities each year. These pre-tax funds are not subject to income tax by the federal government. This makes the contribution income tax free. No itemized deduction for your contributions is available on these direct transfers.

The benefits

• Taxpayers do not have the contributions from their retirement accounts added to their Adjusted Gross Income. So as a planning tool, this donation strategy can keep Adjusted Gross Income low. This can help avoid things that come with higher income levels like different Medicare premiums.
• The contribution counts towards a taxpayer’s annual Required Minimum Distribution. If a taxpayer does not need the income and does not want to be subject to required minimum distribution penalties, this can be a great alternative.
• The contribution is a straight write off. Remember, these funds are sitting in your IRA in pre-tax status. When they are normally withdrawn, the funds are subject to income tax. This tax feature allows you the charitable deduction without the hassle of itemizing your deductions.

Some cautions

As with all tax laws, you must be aware of the rules. Foremost among them are;

• The contribution must be made directly between your account and the charity.
• This benefit is on the federal level. The tax treatment in your home state will vary.
• Since the donation does not go through the taxpayer’s income, the donation is not subject to the percentage of income limits on charitable giving by type of organization.
• Don’t wait. Since it usually takes time to initiate and complete this transfer, do not wait until the end of the year to make your direct contribution. The money must be at the charity prior to January 1st.

While this tax opportunity is not right for everyone, it is a new tool to use when creating your annual tax plan.

As summer vacations continue through the month, please take a moment to review Traveler Safety Tips provided for those who stay in hotels and public lodging. These tips are provided courtesy of the American Hotel and Lodging Association. Be safe out there!

• Don’t answer the door in a hotel or motel room without verifying who it is. If a person claims to be an employee, call the front desk and ask if someone from their staff is supposed to have access to your room and for what purpose.
• Keep your room key with you at all times and don’t needlessly display it in public. Should you misplace it, please notify the front desk immediately.
• Close the door securely whenever you are in your room and use all of the locking devices provided.
• Check to see that any sliding glass doors or windows and any connecting room doors are locked.
• Don’t invite strangers to your room.
• Be aware of potential phone scams and prank calls to your guestroom. Hotel employees will never request credit card or personal information over the phone, nor will they advise a guest to damage hotel property.
• Place all valuables in the hotel or motel’s safe deposit box.
• When returning to your hotel or motel late in the evenings, be aware of your surroundings, stay in well-lighted areas, and use the main entrance.
• Take a few moments and locate the nearest exit that may be used in the event of an emergency.
• If you see any suspicious activity, notify the hotel operator or a staff member.Source: American Hotel & Lodging Association

Tips to Make School Expenses Deductible

It seems like summer has just begun and the Back-to-School advertising blitz has already started. Are there tax savings opportunities within this nightmare for our kids? Certainly, if you are tax smart about your spending. While the amounts may be small, they can add up in a hurry. Here are some ideas:

• Purchasing the class supply list could have deductions in it. Often schools send a list of requested supplies for the school year. Some of the items on the list are clearly for personal use (such as an eraser or a ruler) while other items on the list are often for school use and classroom use (such as 24 pencils or paper towels). This classroom supply technique effectively transfers the school expenses to our children. Keep track of these non-cash classroom/school donations for possible non-cash charitable deductions.
• Donate funds versus buying the supplies.Instead of buying the classroom supplies yourself, consider providing a check written to the school as a donation. This helps in two ways: First, it becomes a clear cash donation with a canceled check as a receipt. Second, if your school has a good supply agreement, the purchasing power of your donation will go further.
• Whenever you donate, get a written confirmation from the school or your child’s teacher representing the school. Most teachers do not have the form, so bring one with you that the teacher can sign. You can get the directions on www.irs.govor simply use a respected charitable group like Goodwill, or the Red Cross for a format to copy.
• Leverage the school’s PTA. This non-profit parent group, if a qualified charitable organization, is a great resource to help your school AND help you get deductible donations for funds you would otherwise provide to your child’s school.
• Use checks not cash. If you usually provide donations to the school in the form of cash (like providing additional money to help other kids go on field trips) make those donations in the form of a check. Cash donations without receipts are not deductible.
• Donate funds versus taking the raffle ticket. Raffles, subscription drives, and silent auctions are fun ways schools raise funds. To maximize your ability to deduct your donations, forego the possible prize. Then the entire donation is clearly deductible.
• Don’t forget your out-of-pocket expenses for your volunteer activities. Perhaps you donate your time at school functions, donate books to the school library, or help assist the teaching staff. Your out-of-pocket expenses and your mileage should be tracked for charitable deduction purposes.
• Teachers, save your out-of-pocket expenses. The $250 deduction for qualified educators out-of-pocket classroom expenses is a popular tax provision in Congress that is now a permanent part of the tax code.

Finally, don’t forget to review state rules for educational expenses. There are often credits available for out-of-pocket school and other educational expenses.