3 Last-Minute Retirement Tax Breaks for 2010

Here are a few 2010 retirement tax breaks you can still qualify for.

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It’s not too late to qualify for retirement tax breaks on your 2010 tax return. Here are a few tax moves you still have time to make that could save you money on your 2010 taxes.

[See 10 Key Retirement Ages to Plan For.]

IRA contributions. Retirement savers have until April 18, 2011 to make IRA contributions that count for the 2010 tax year. However, if you make an IRA contribution between January 1 and April 18, 2011, you need to tell the account sponsor which tax year the contribution is for. Otherwise, the financial institution can assume and report to the IRS that the contribution is for the calendar year the deposit was received, and you will not get a tax break for that contribution in the 2010 tax year. You can file your tax return claiming a traditional IRA contribution before the money is actually in the account. However, the deposit must be made by the due date of your tax return.

Retirement savers can contribute up to $5,000 to an IRA, Roth IRA, or combination of the two accounts in 2010, or $6,000 if they are age 50 or older. The maximum tax-deductable contribution amount may be reduced depending on your modified adjusted gross income for the year.

[See 4 Ways to Stay Employed After Age 50.]

Charitable contributions. Retirees can avoid paying income tax on IRA distributions if they donate that money to a charity. Individuals age 70½ or older can exclude from gross income up to $100,000 ($200,000 for couples filing joint returns) that is paid directly from the IRA (excluding SEP or SIMPLE IRAs) to a qualified charity. The deadline for making a charitable distribution from your IRA that counts for the 2010 tax year is January 31, 2011.

The IRA trustee must make the donation directly to the qualified charity. Distributions the IRA owner actually receives and tax withholdings cannot qualify as charitable donations. IRA owners who have already received their 2010 required minimum distributions may not recontribute those distributions to an IRA and then donate the money to a charity. However, retirees who withdrew more than the minimum required amount from their IRA in 2010 can put that money back in the IRA within 60 days of taking the distribution and then have the funds paid directly to a charity without incurring income tax on the amount donated.

[See 6 Retirement Planning Regrets.]

Undo Roth IRA conversions. While it’s too late to initiate a 2010 Roth IRA conversion, there’s still time to undo a conversion you have changed your mind about. IRA account owners have until October 17, 2011 to move the amount converted to a Roth IRA back into a pre-tax account. You will then need to file an amended tax return and subtract from your 2010 gross income the amount you shifted back into the traditional IRA.