As the end of the calendar year approaches, the Jewish Federation of Greater Philadelphia’s Jewish Community Foundation wants to remind you about charitable giving strategies to maximize the support you can provide organizations, along with reducing your overall tax liability — not just income tax, but also capital gains tax and even potential estate tax exposure for your heirs. However, please keep the possible impact of the election in mind as changes in tax law may impact your investments and giving strategies.
Key Year-End Charitable Giving Strategies: Donations to charity can reduce your overall income tax bill if you itemize your deductions. You can also avoid the application of capital gains taxes if you are contributing assets, such as stock, 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 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 and 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 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. The Jewish Community Foundation of Greater Philadelphia operates DAFs and is skilled at accepting appreciated assets; these include publicly traded stock as well as other types of non-cash assets.
“Bunching” Charitable Gifts Can Magnify Tax Benefits: Enhance your tax savings by “bunching” two or more years worth of contributions this year. The larger contribution can create a bigger tax benefit this year and then provide a fund from which distributions 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 deductions 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 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 (indexed for inflation) to fund a charitable gift annuity that can pay you a fixed amount of money each year for life. Jewish Community Foundation professionals can provide you with more information on 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. The results of the November election may help you predict how best to structure and time your charitable and family giving. The new administration and 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.
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Your Jewish Community Foundation professionals will be happy to discuss these and other charitable giving strategies with you and your advisors. Please contact the Jewish Federation’s Chief Planned Giving Officer Jennifer Brier at jbrier@jewishphilly.org or 215.832.0528 for more information.
*The Jewish Community Foundation of the Jewish Federation of Greater Philadelphia does not provide legal or tax advice. Please consult with your personal advisor(s).
