The Pension Protection Act (PPA) of 2006 introduced a little-used tax trick – you are allowed to donate money directly from your IRA and have it count as part of (or all of) your Required Minimum Distribution (RMD). You must be 70-1/2 or older, and the limit is $100K. Who does this benefit? For starters, only those who are taking RMDs, about 9% of the population. Next, it really will just help those who don’t itemize, after all, if you itemize, a charitable donation is a deduction added to your schedule A itemized deductions. Last you have to want to donate to charity anyway. You see, donating $1000 to save $250 in taxes makes little sense. But if you planned the donation anyway, this will save you some tax in the process.
I started by discussing PPA, passed in 2006, so why do I bring this up now? The rule allowing the donation from your IRA had expired in 2009. It was only the Tax Hike Prevention Act passed in December 2010 that revived this opportunity. Since it was passed so late in the year, you have until January 31 to make that donation and have it count for 2010.