If you are considering making charitable contributions with some of your retirement money in the near future, you may want to make those contributions before the end of 2017. With the Republican tax reform bill set to become reality, the tax benefits of making such charitable contributions will see a major change in 2018. The bill nearly doubles the standard deduction for both single and married couples, thus limiting the number of people who can itemize starting next year as only people whose total itemized deductions exceed the standard deduction can itemize. The ability to itemize is important because you must do so in order to deduct a charitable gift. If you are unable to exceed the standard deduction, you will lose the ability to deduct charitable gifts when it comes to your taxes. This change could have a huge impact on people who may have been planning to make charitable gifts during retirement and have plans to deduct those gifts from their taxes. If you have questions regarding your charitable gifts and any corresponding tax questions, you will want to speak with a tax professional who will help you understand what the changes mean and how you can best move forward with your plans.
It’s well known that the current tax reform legislation making its way through Congress can, and most likely will, impact your retirement accounts and plans. One target is regarding recharacterizations of Roth IRA and traditional IRAs, which both the House and Senate bills would do away with. Recharacterizations are important because it is one of the few tools available to correct a conversion. Under the current system, you have until October 15 of the year following the year in which you made the conversion to recharacterize it. This current system gives people time to reconsider and think about conversions and take steps to fix it. However, if that is done away with, people may be much more cautious with conversions. Furthermore, if these proposed bills are signed into law before the end of the year, the elimination of the ability to recharacterize a conversion most likely will happen sooner rather than later. Therefore, if you have been thinking about recharacterizing a conversion you made in 2017, you may want to do so before the end of the year or in the early part of 2018.