As we approach the end of the year, the Jewish Community Foundation, Inc. would like to remind you about year-end charitable giving strategies to maximize the support you can provide to our Jewish community nonprofit organizations, along with reducing your overall tax liability—not just income tax, but capital gains tax and even potential estate tax exposure for your heirs.
In addition, if you are looking to start a donor advised fund or endowment fund with the JCF or make a contribution into an existing JCF fund, please refer to the lower graphic at right regarding deadlines that may apply to your meeting your goals before year-end (or click here to download a PDF version).
Key Year-End Charitable Giving Strategies: Donations to nonprofits such as the Jewish Federation or one of our agencies can reduce your overall income tax bill if you itemize your deductions. You can also avoid the application of capital gains taxes if you contributing assets such as stock or bonds that have appreciated in value. Gifts of retirement assets can provide a current tax benefit as well as remove the gifted assets from your estate. Here are some tips to consider:
Gift Appreciated Assets: Charitable gifts of appreciated assets owned for over one year remain a best practice, and with the rise in stock market values over the last 12 to 18 months, you may have experienced significant growth in your investment portfolio. Such gifts can provide you with a deduction for the full current value of the asset, but also avoid the capital gains tax that would apply if you sold the assets yourself rather than gifted them. Conversely, assets with built-in losses generally should be sold (generating a tax loss) with the resulting cash proceeds donated, if desired. Note: up to $3,000 in capital losses may be used to offset other income on your tax return.
Donate to a Donor-Advised Fund (DAF): If you are considering making a significant donation to charity over time or just want the ability to plan your charitable grants over a period of months or years, you should certainly consider opening a DAF with the Jewish Community Foundation. Funding your DAF with appreciated assets can be especially beneficial as you again avoid any capital gains liability. Our Jewish Community Foundation team members are skilled at accepting appreciated assets including publicly traded stock, and other types of non-cash assets such as life insurance, privately held business interests, real estate, and certain collectibles.
"Bunching" Charitable Gifts Can Magnify Tax Benefits: Combining these two aforementioned strategies can enhance your tax savings by “bunching” two or more years of contributions into this year. The larger contribution can create a bigger tax benefit this year and then provide a fund (DAF) from which grant recommendations can be made over several years to satisfy your anticipated charitable giving. This approach is especially helpful for donors who might not otherwise be eligible to itemize their deductions. Only taxpayers who itemize their deductions get a tax benefit from a charitable gift. By bunching into a DAF this year, you can increase the total amount of deduction to a level at which it may be more advantageous to itemize than to rely on a standard deduction.
Utilize IRA Charitable Rollovers: If you or your spouse are over age 70 ½, the IRA charitable rollover (also known as a qualified charitable distribution or QCD) is an attractive option that permits you to transfer up to $105,000 this year (the amount is indexed for inflation) from each of your individual retirement accounts directly to a charity, free of any income tax. In addition, such rollovers help satisfy the required minimum distribution (RMD) for your IRA if you’ve reached the age where such distributions must be taken into income (generally when you reach age 73). The rollover also removes these retirement assets from any potential estate tax exposure.
Initiating an IRA charitable rollover to an endowment fund with the JCF can be a great way to build your legacy for future generations.
If you plan to utilize an IRA charitable rollover, please be sure to start the process well before December 31 as it can take several days or even a week or more to complete the transaction.
It is important to note that, per IRS regulations, an IRA charitable rollover cannot be made to a DAF.
One last IRA rollover advantage: Congress recently expanded the rollover to allow for a one-time-up-to $53,000 distribution to fund a charitable gift annuity that can pay you a fixed amount of money each year for life. Please contact the Jewish Community Foundation if you would like more information about this option.
Accelerating Non-Charitable Family Giving: The current unified estate and gift tax credit of $13.61 million currently is scheduled to decrease to around $7 million beginning with transfers made in 2026. Accordingly, if you intend to make significant family gifts (either during your lifetime or in your will), you may want to consider accelerating some or even all those gifts earlier, as your resources permit.
Watch for Legislative Changes: As with any significant tax and charitable planning, it is recommended that you carefully consider potential changes in the context of your complete financial portfolio and consult with your tax and financial advisors. In some years, there can be changes to tax laws made right up until December 31, and following that, the new Administration and the next Congress will need to consider significant tax legislation in 2025, as virtually all of the provisions passed in 2017 that relate to individuals will be affected. The results of the November election may help you predict how best to structure and time your charitable and family giving.
Our local Jewish Community Foundation team would welcome the opportunity to discuss these and other charitable giving strategies with you and your advisors, but please keep in mind that JCF does not provide estate, financial, legal, or tax advice.
The JCF thanks and recognizes the Planned Giving and Endowments Department of the Jewish Federations of North America for providing content for this article.
JCF Contact Information:
David Snyder, Executive Director
Jewish Community Foundation
856-673-2571
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