Looking at Year-End Charitable Giving and Tax Planning

By Sarah Gotlieb and Bobby Garon

As community members start thinking about year-end financial planning, the Birmingham Jewish Foundation and the Jewish Endowment Foundation of Louisiana are sharing ideas that one may consider. They caution that this article should not be considered tax advice, and encourage everyone to consult with their tax advisor to receive optimal tax advantages and guidance.

As the end of the year approaches, they note it is helpful to reflect on how donors can use specific charitable giving strategies to maximize the support they can provide to the organizations they care about while also potentially reducing overall tax liability.

Key Year-End Charitable Giving Strategies

Gift Appreciated Assets: Charitable gifts of appreciated assets (stock donations) 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, but also avoid the capital gains tax that would apply if the assets were sold. Conversely, assets with built-in losses generally should be sold (generating a tax loss) with the resulting cash proceeds donated, if desired. Note that, as in previous years, up to $3,000 of capital losses may be used to offset ordinary income.

Donate to a Donor Advised Fund: 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, but want a deduction today, consider opening a DAF or adding funds to an existing DAF.

“Bunching” Charitable Gifts Can Magnify Tax Benefits: Another favorable benefit to opening a DAF is the ability to “bunch” or “bundle” your charitable contribution in any given year, enabling you to exceed the standard deduction but distribute money held in your DAF over time. You can enhance your tax savings by “bunching” multiple years 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. Both BJF and JEF offer donor advised funds and are happy to assist.

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 required minimum distribution 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. Additionally, Congress recently expanded the rollover to allow for a one-time up-to-$53,000 distribution to fund a charity gift annuity that can pay you a fixed amount of money each year for life. Your BJF or JEF endowment professional can provide you with more information on this option.

However, please note that rollovers cannot be made to a Donor Advised Fund but can be made to a Designated Fund (which JEF can create for you) or directly to a charity. BJF is not able to accept such gifts, but charitable distributions may be made directly to Federations, synagogues, and other partner agencies.

Accelerating Non-Charitable Family Giving: The current unified estate and gift tax credit of $13.61 million currently is scheduled to automatically reduce to around $7 million beginning 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 all of those gifts earlier, as your resources permit.

As with any significant tax and charitable planning, it is always advisable that you carefully consider potential changes in the context of your complete financial portfolio and consult with your tax and financial advisors.

The agencies also have a reminder about this year’s deadlines for year-end giving:

Online until 11:59 p.m. on Tuesday, Dec. 31;

By mail with a postmark no later than Dec. 31; or,

Hand-deliver your gift directly to our office before 12 p.m. on Dec. 31.

To make a grant recommendation from a DAF, submit the request no later than Friday, December 13.

Additionally, securities may be donated by Friday, December 13.

For more information, contact Sarah Gotlieb at the Birmingham Jewish Foundation at (205) 803-1519 or Bobby Garon at the Jewish Endowment Foundation of Louisiana at (504) 524-4559.

Disclaimer: BJF and JEF do not provide tax advice. Please consult with your professional advisor before taking any action.