Year-End Planning Points

As you and your clients turn to year-end tax and charitable planning, there are several additional factors this year that can influence key decisions. The COVID-19 pandemic continues to cause economic uncertainty; and the election may bring significant changes to income tax and estate and gift tax laws.

Matthew A. Kaliff (mkaliff@jcfcleve.org) or Carol F. Wolf (cwolf@jcfcleve.org) are available to assist you and your clients with gift planning consultations.

CARES ACT PROVISIONS FOR 2020:

• Individuals may deduct up to 100% of AGI for cash gifts directly to a charity (other than donor-advised funds, supporting organizations, and private foundations)
• Non-itemizers may claim an above-the-line charitable deduction of up to $300 for cash gifts to charity

IRA QUALIFIED CHARITABLE DISTRIBUTION (QCD):

• Even though the RMD is waived for 2020, individuals 70½ and older may still distribute up to $100,000 directly to charitable organizations tax-free
• May be advantageous for non-itemizers
• QCDs made now may help lower RMDs and taxes in future years
• Preserves non-IRA assets for heirs. The SECURE Act eliminated the “Stretch IRA” for most non-spouse inheritors who must now take their full IRA distribution within 10 years and pay associated taxes
• QCDs are excluded from income; they will not affect Medicare Part B or D premiums or other itemized deductions with AGI-based limits. (This strategy may not be favorable where state income taxes apply.)
• Alternatively, make charitable gifts of amounts withdrawn from an IRA, using tax deductions to offset the taxable income that withdrawals will generate. These cash contributions could be used to fund donor-advised funds or supporting organizations up to the standard limit of 60% of AGI. (This strategy may impact AGI-based Medicare premiums and other deduction limits.)

GIFTS OF APPRECIATED SECURITIES

• Avoid capital gains taxes; generate an immediate tax deduction for itemizers
• Pay a campaign pledge, or add to or create a donor advised fund or endowment fund

DONOR ADVISED FUNDS:

• Contribute cash, securities, or other property to the Federation to establish a donor advised fund
• "Bundle" multiple years of anticipated giving to exceed the standard deduction for the current year
• Make donor advised fund assets a part of testamentary planning

CHARITABLE GIFT ANNUITIES:

• Guaranteed lifetime income
• Annuity payout rates generally exceed CD and money market rates
• Partially tax-free payments
• Bypass some capital gains on gifts of appreciated assets
• Itemizers receive a current income tax deduction

ESTATE PLANNING CONSIDERATIONS FOR 2020:

It may make sense for some donors to engage in gift transactions before year-end to take advantage of the high exemption amounts. Donors who are considering making such gifts may also wish to accelerate these transfers to provide significant support to charities now, especially as many charities face increased costs and potential decreases in fundraising during the pandemic.

As with all tax and charitable planning ideas, it is essential to review existing income, estate, and charitable giving plans to assure that potential changes are viewed in the context of the client’s complete financial profile. The Federation does not provide tax or legal advice.

The Jewish Federation of Cleveland (license # CH22328) is registered to solicit charitable donations within Florida and provides disclosure as required by Chapter 496 of the Florida Solicitation of Contributions Act as follows:

“A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE (800-435-7352) WITHIN THE STATE OR BY VISITING WWW.800HELPFLA.COM. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL OR RECOMMENDATION BY THE STATE.”