The following information was prepared by the UJCVP in conjunction with the Jewish Federation of North America (JFNA).  We are making this information available as a courtesy.  It 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.

Dear Community Member:

Year-end has always been an advantageous time to review certain strategies to reduce overall income tax liability. And now that it has been almost two years since the 2017 Tax Cuts and Jobs Act (“2017 tax act”) was enacted, it’s important to review some traditional tax planning strategies as well as to determine whether some new techniques could help cut your federal and state tax bills.

Determine Your Tax Bracket

One of the first steps to take is to estimate your 2019 tax bracket. If you expect to be in the same or lower tax bracket in 2020, it may be beneficial to defer taxable income until next year or reduce this year’s taxable income. Tried and true strategies for lowering your tax bill include deferring receipt of a bonus payment to 2020, accelerating remaining deductions into this year by prepaying a deductible expense, maximizing contributions to qualified retirement plans, or making larger charitable gifts.

 

Itemize or Standard Deduction?  Do You Know What “Bunching” is?

One of the most significant changes in the 2017 tax act was the dramatic increase in the standard deduction. For 2019, married couples filing jointly can claim a standard deduction of

$24,400 ($27,000 for those over age 65). If you claimed itemized deductions in the past, you may now want to consider “bunching” those deductions into one year in order to exceed the standard deduction amount and claim the standard deduction in other years. Perhaps the easiest itemized deduction to bunch is that for charitable contributions. One way to accomplish this is to combine tax-deductible contributions that would otherwise be given in two or more years into one.  Make charitable contributions in the “bunching” year to a new or existing donor advised fund (“DAF”) offered by the UJCVP Endowment. Claim the charitable deduction in the year you make the contributions and spread distributions to charities over several years.

Are you Over 70 ½?

If you are at least 70 ½ years old and are considering donating to charity, it may be more beneficial to make the donation from an individual retirement account. Qualified charitable distributions can count against the “required minimum distribution” amount. An IRA Charitable Rollover is not deductible, but because it is not included in gross income, the net effect may be the same as it would have been had you made a charitable contribution. As a bonus, you do not have to itemize to get the tax benefit of your gift, so you can still claim the higher standard deduction under the 2017 tax act.  Use your IRA Charitable Rollover to pay your Annual Campaign pledge, establish a Lion of Judah or Perpetual Annual Campaign Endowment or use it to establish an endowment fund.

Investment Assets

2019 continues to be another good year for the stock market and other investment assets. As year-end approaches, it is an opportune time to review your investment portfolio and consider timing the recognition of capital gains and losses. Part of your capital asset review could be consideration of a gift of appreciated securities to charities. You can avoid paying any capital gains tax on the value of securities transferred to the UJCVP, and you may be able to receive a charitable contribution deduction for the full fair market value of the securities at the time of the gift.  Or consider donating appreciated stock, to establish a DAF or add to an existing DAF at the UJCVP Endowment. It is an excellent way to maximize tax savings from such gifts and retain the privilege of making grant recommendations in the future.

If you have any questions about pledges, contributions or setting up an Endowment fund, please contact Sarah Barnett, Steve Wendell, or Angela Morris at the UJCVP.