By Robert G. Kuchner, JCF President
As year-end approaches, you may want to combine your desire to help the causes you support with your desire to save on taxes. As you all know, this weekend the Senate approved its version of the tax bill, leading to reconciliation with the House bill in the next few weeks. With passage of this bill, many of you may see your taxes drop, while many will experience a tax hike. As New Jersey residents, living in a high tax state, we will be especially affected by these changes.
With major revisions in the tax code looming but still so uncertain, here are some things to consider about accelerating your charitable giving into 2017, potentially saving yourself money before rates are likely to change.
Next year, many households that typically itemize tax deductions may take advantage of a higher standard deduction, which is expected to double from $12,000 to $24,000. Although the House and Senate bills have slightly different permutations, both most notably eliminate or severely limit many of the usual deductions. These include elimination of/or limitation of the state income and real estate property tax deductions, elimination of the medical expense deduction, and severe limitations on the mortgage interest deduction. If, due to income limitations, you choose to take a standard deduction next year, you may no longer benefit from deducting charitable contributions after December 31, 2017. So, if you do not expect to itemize in 2018, a viable tax-saving strategy is to accelerate your charitable contributions before the end of 2017.
Many of you prefer to donate appreciated securities, rather than cash. Typically, donating appreciated stock eliminates both the potential capital gain on selling the stock and gives you a donation at the market value when you make the transfer. The new Senate tax proposal includes a spoiler for 2018 donations of securities. Now, individuals can specifically identify which shares of stock are sold or gifted to charity to get the deduction, but under the proposed change, individuals would be required to use the “FIFO” method (sell or gift the oldest lot of securities first) for any sale, exchange, or gift starting January 1, 2018. This makes 2017 year-end gifts of appreciated stock particularly attractive because you can still specify the shares.
An effective vehicle (which also works around this proposed change) is to make your charitable gift to a JCF donor-advised fund (DAF), which can be established efficiently and timely, before thus year-end. With a DAF, which is a program of a public charity, you make contributions to the DAF now, take an immediate tax deduction, and then make recommendations on how to disperse those funds to qualified charitable organizations on your own timetable. If you can swing it, you should really consider donating several years’ worth of donations now through a DAF.
The rules are changing daily, so of course you’ll want to consult your tax adviser on the details of year-end planning to minimize your tax exposure this year.
We hope you include Jewish Community Foundation of Greater MetroWest in your year-end plans and that they include a gift to Federation’s UJA Annual Campaign. We are always available to help you navigate the process during these changing times. Feel free to contact JCF Executive Director Stanley Stone at email@example.com or (908) 288-2401, or Federation Chief Financial Officer Howard Rabner at firstname.lastname@example.org or (973) 929-3020.