As the House and Senate spend the next few days ironing out their differences in their versions of the tax cut bills, now is the time to consider a number of planning strategies that can impact your 2017 and 2018 taxes. The tax bill will significantly reduce the number of taxpayers who itemize and effectively eliminate the income tax charitable deduction for a vast majority of Americans. Therefore, if you plan to itemize for 2017, consider making a gift this calendar year to realize the full tax benefit.
What can I do before December 31? Consider accelerating deductions before year-end, such as making additional charitable contributions to get a larger income tax charitable deduction this year, especially if they won’t provide a tax benefit next year. If you expect your overall tax bill to go down next year (for example: your top tax rate goes down), it also may make sense to accelerate charitable contributions before year-end.
What’s the best way to pay for the donation? If you have stock or other securities that have appreciated in value, it probably makes sense to contribute these assets to charities such as the federation rather than making a cash gift. You may be able to take a deduction for the full-market value of the stock and you will avoid any capital gains tax on any accumulated appreciation by donated the asset.
Do donor-advised funds make sense? Yes, these funds are easy to establish with a Federation or Jewish Community Foundation and the contributions can be tax deductible this year, even if the funds are granted to another charity next year or later. And the funds can be invested and will grow tax-free until granted. The Minneapolis Jewish Federation cannot provide tax advice so we encourage you to meet with your tax or financial advisors to determine if making or accelerating gifts will be beneficial to your particular situation.
This letter is for informational purposes only and should not be construed as legal, tax or financial advice. When considering gift planning strategies, you should always consult with your own legal and tax advisors.