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U.S. tax policy provides many significant incentives for charitable contributions. Your annual or endowment gift may result in substantially reduced income, capital gains and estate taxes.
The Secure Act 2.0 was included in The Consolidated Appropriations Act of 2023 (H.R. 2617). It includes many changes that will enhance and facilitate retirement benefits. Since passage of the original Secure Act in 2019, both House and Senate Members have been working on further changes to encourage saving for retirement. Secure Act 2.0 will increase the required minimum distribution age, allow a larger catch-up contribution limit, facilitate rolling some Section 529 plans into Roth IRAs and generally expand access to retirement plans for moderate and lower-income employees. You can click on and download the SPECIAL EDITION- SECURE ACT 2.0 – 2023 BENFITS document for more information.
The following are the tax consequences of your contributions to the Jewish Federation or the Jewish Community Foundation.
You may take an income tax deduction for up to 50% of your annual adjusted gross income. If your contributions exceed this amount, the deduction may be carried over for up to five years.
If you are in the 28% tax bracket, your gift will actually cost 72 cents for every dollar donated.
Gifts of appreciated securities can be one of the most advantageous ways of giving. If you give stock you have owned for more than one year you may:
* take an income tax deduction for the full current market value, and
* pay no capital gains tax.
Like gifts of appreciated stock, if you give property you have owned for more than one year, you may deduct its full current fair market value, and pay no capital gains taxes.
In addition, you may contribute a personal residence and retain the right to live in it for your lifetime. In this case, your income tax deduction is the value of the Foundation’s remainder interest and the residence will not be considered when calculating your estate taxes.
Gifts of tangible personal property related to the Foundation’s purposes are fully tax deductible at fair market value. Gifts of personal property unrelated to the Foundation’s purposes are deductible at their cost basis.
A gift of a Life Insurance Policy may be deducted from your income tax as a charitable deduction. The amount of the deduction is the replacement value or cost basis of the policy, whichever is less. In addition, all premiums paid are deductible in the year paid.
A trust that first makes annual payments to the Foundation for a term of years and thereafter passes its assets to your children or grandchildren. Such a trust will substantially reduce the gift and estate tax cost of transferring assets to your heirs.
You may make a gift that first pays you an annual income for life and thereafter passes to the Foundation. There are many advantages to such gifts:
• You receive a very high income.
• Part of the income may be tax-free.
• You may take an immediate income tax deduction for the present value of the gift.
• Contributing appreciated assets avoids capital gains tax.
• The assets are not considered when calculating estate tax.
The entire amount of a Testamentary Bequest in your will or trust qualifies for an unlimited charitable deduction from your estate taxes.
As can be seen, planned charitable giving, properly structured, may result in substantial tax and estate planning benefits.
The above is a brief overview of the substantial tax benefits of supporting our Jewish Community. It is not intended to be direct advice. Please consult with your own legal or financial advisor to learn how your gifts to the Foundation will lower your taxes.
If you wish to explore any of the above alternatives further, you may schedule a free confidential consultation with the Foundation Director (717) 236-9555.
The Jewish Community Foundation of Central Pennsylvania professionals, board and committee members do not provide tax, legal or investment advice. This information is for educational purposes only and should not be interpreted as professional advice. Always consult your own trusted professional advisor before making any financial decisions.