Year-End Planning Strategies: Go with What Works

Congress continues to negotiate the budget reconciliation package with details constantly in flux. The fluid political dynamic makes predicting which tax changes will become law a challenge. Despite the legislative uncertainty, you can still take advantage of these tax-wise strategies before year-end.

Contribute appreciated assets. Gifts of appreciated securities and other assets held more than one year remain a best practice. Generates a current deduction and avoids tax on the value of the appreciation.

Don’t Overlook Cash Gifts. Two tax benefits for cash contributions are set to expire in 2021.

• Individuals who itemize can use charitable donations of cash to offset up to 100% of adjusted gross income (AGI).
• Non-itemizers who file jointly can deduct up to $600 for cash contributions; single filers may claim up to $300.

These cash gifts must go directly to a public charity. Donor advised funds, private foundations and supporting organizations do not qualify.

Fund a Charitable Gift Annuity (CGA). Use appreciated stock to defer capital gains over the life of the CGA, receive guaranteed income, partially tax-free. Or create the CGA with cash and deduct up to 100% of AGI in 2021.

Open or add to a Donor Advised Fund (DAF). Consider donating to a DAF this year for maximum flexibility. The contribution generates a current deduction while grants from the fund may be recommended over time.

Make a Charitable Stock Swap. Contribute shares of stock (owned one year or more) and immediately purchase new shares in the same company. The shares are now at a higher basis but the portfolio remains unchanged. Because this is gain property, the “wash sale” rule does not apply.

Use the IRA Qualified Charitable Distribution (QCD). Persons age 70½+ can satisfy annual RMD up to $100,000 without incurring income tax by making a QCD directly to a charitable organization (other than a donor advised fund, private foundation or supporting organization).

Make Charity the Beneficiary of an IRA or 401(k). Most non-spouse beneficiaries of retirement accounts must withdraw the entire inherited balance by the end of 10 years and pay tax. Leaving all or part of the account to charity avoids these taxes.

These strategies may be used for annual gifts, multi-year giving, as well as endowment giving.

For more information or gift illustrations, please contact Matthew A. Kaliff at 216-593-2831 or mkalif@jcfcleve.org. Thank you for your support now and throughout the year.

This material is presented for informative purposes only and should not be construed as legal, tax, or financial advice. When considering gift planning strategies and year-end gift opportunities, you should always consult with your own legal, tax, or financial advisors.

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.”