Winding down from the whirlwind of family High Holiday celebrations and gearing up for Thanksgiving, I am reminded that our worldview is relative. For example, instead of focusing on the volatility in the market this past quarter, we should take the long view over time that our investment strategy is meant to provide for the long-term stability of assets to assure the future of the Tidewater Jewish Community.
Given the current short-term volatility in the market, now is the time to sit tight and remember that the Tidewater Jewish Foundation investment strategy takes a long view approach. Specifically, for TJF’s donor-advised fund holders who are nervous about recent short-term decreases in fund balances, it is important to think about the long view and adding assets to those funds. When assets were added to the fund(s), donors received the charitable deduction for the full amount of the original gift. While there may be less to recommend for distribution, it is important for donors to remember it is all relative and that they will have an opportunity to grow assets for charitable intent. Now, while the market is down, is a great time to add to the fund’s balance to enjoy (hopefully) better returns in the future.
Key considerations for year-end tax planning
• Use appreciated assets to make a charitable gift in 2022. As in previous years, gifts of long-term appreciated assets (stock) remain a best practice. Such gifts not only provide a deduction to the donor, but also avoid the capital gains tax. Conversely, built-in loss assets 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.
• Consider donating to a DAF this year for maximum flexibility. If you are considering making a significant donation to charity over time but want a charitable income tax deduction today, consider adding funds to an existing donor-advised fund (DAF) or opening a new DAF. It can be especially beneficial to donate appreciated property, because by doing so capital gains taxation with respect to the contributed assets is eliminated.
TJF has an incentive match of $2,500 when a donor opens a DAF with a minimum of $7,500.
• Look into an IRA charitable rollover. The IRA charitable rollover, also known as a Qualified Charitable Distribution or QCD, is an attractive option because it can help satisfy the minimum distribution requirement without incurring income tax, even for those who don’t itemize deductions. If the proposed legislation expanding the amount and nature of rollovers is enacted, this option will become even more attractive.
• Consider taking advantage of energy incentives in the Inflation Reduction Act. When planning for 2023, consider taking advantage of the new and newly expanded and extended green energy incentives that are provided by the Inflation Reduction Act, including the tax credits for rooftop solar panels, insulation, electric vehicle purchases, and energy-efficient home improvements. Each of these incentives has somewhat complex rules, and some do not go into effect until 2023, so careful research is required.
• Consider accelerating non-charitable gifts. The unified estate/gift credit of $12.06 million is scheduled to automatically reduce to around $6 million beginning with transfers made in 2026. Accordingly, taxpayers who intend to make significant gifts (either during their lifetime or in the form of bequests) may want to consider accelerating some or all of those gifts early.
As with any significant tax and charitable planning, it is always advisable to carefully consider potential changes in the context of your complete financial profile and to consult your professional tax advisor.
Naomi Limor Sedek is Tidewater Jewish Foundation’s president and CEO. She may be reached at Nsedek@ujft.org.
Disclaimer: The Foundation does not provide tax advice. Please consult with your professional advisor before taking any action.
–Naomi Limor Sedek