Year-End Charitable Giving and Tax Planning

Year-End Charitable Giving and Tax Planning

Jewish Federation of North America (JFNA)

As we approach the end of the year it is helpful to reflect on how you can use specific charitable giving strategies to maximize the support you can provide organizations as well as reduce your overall tax liability. Not only can these smart strategies boost your giving, but they can also reduce income tax and capital gains tax, as well as potential estate tax exposure for your family.

Key Year-End Charitable Giving Strategies

Donations to charity can reduce your overall income tax bill if you itemize your deductions and can avoid the application of capital gains taxes if you are disposing of assets such as stock that have appreciated in value. Gifts of retirement assets also can provide a current tax benefit as well as remove the gifted assets your estate. Here are some tips to consider: 

• Gift Appreciated Assets: Charitable gifts of appreciated assets remain a best practice, and with the rise in stock market values over the last 12to 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 of 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 years, consider opening a DAF or adding funds to an existing DAF. Funding your DAF with appreciated assets can be especially beneficial as you again avoid any capital gains liability. Federations and Jewish Community Foundations that operate DAFs are skilled at accepting appreciated assets including publicly traded stock, as well as other types of non-cash assets such as life insurance, privately held business interests, real estate or certain collectibles.

• Utilize IRA Charitable Rollovers: If you or your spouse are over age 70 ½, the IRA charitable rollover 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 IRA minimum distribution requirement 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. One last IRA rollover advantage: Congress recently expanded the rollover to allow for a one-time-up-to $53,000 distribution to fund a charity gift annuity that can pay you a fixed amount of money each year for life. Your Federation endowment professional can provide you with more information on this option. 

Jewish Long Beach & the Jewish Community Foundation of Greater Long Beach will be happy to discuss these and other charitable giving strategies with you and your advisors but remember that JFNA and Federations do not provide tax advice. contact Kevin Giser at kgiser@jewishlongbeach.org or 562.426.7601 ext. 1011