2020 has been a tumultuous year, to say the least. As you and your advisors sit down to discuss year-end tax and charitable planning, there are several additional factors this year that can influence key decisions. The COVID-19 pandemic continues to impact virtually all aspects of the economy; and the upcoming election is bound to bring changes to Washington that could result in significant changes to the income tax and the estate and gift tax regimes.
Differing tax agendas could bring significant changes either way: There are major differences between the tax agendas of President Trump and former Vice President Biden. The Trump tax plan for the second term revolves around making permanent several key provisions of the Tax Cuts and Jobs Act of 2017, as well as a potential cut in the tax rate on capital gains and dividends. The Biden tax agenda contemplates re-imposing a top income tax rate of 39.6 percent above $400,000 and taxing capital gains and dividends at ordinary income tax rates for those taxpayers with incomes over $1 million.
CHARITABLE GIVING
This year, charitable giving takes on new meaning and importance. In a time of social distancing and uncertainty, giving is now a primary way to care for one another and remain connected. Also important is the increased reliance on charitable giving for community organizations and the many families who are struggling to make ends meet. There are few times in history where we have needed each other more.
Members of the Tidewater Jewish community, along with people across the globe, have risen to the challenge and are giving generously to care for others. As we near the end of the year and begin to evaluate personal finances, you may want to consider a handful of giving strategies to reduce your tax burden and make a greater impact.
DONATE TO THE TIDEWATER JEWISH COMMUNITY COVID-19 EMERGENCY RELIEF FUND
The COVID-19 Emergency Relief Fund provides support for cherished community institutions and helps ensure our most vulnerable community members have the resources needed to navigate these unprecedented times. A joint effort between United Jewish Federation of Tidewater and Tidewater Jewish Foundation, to date, the Fund has distributed more than $100,000 to assist vulnerable populations, agencies, and synagogues. Additionally, TJF donor advised fund holders have made more than 40 distributions to help meet COVID-related needs. Dollars have gone to area congregations, provided personal protective equipment for Beth Sholom Village and Jewish Family Service (JFS), helped JFS provide financial assistance for individuals in need, assisted the Foodbank of Southeastern Virginia and JFS Food Pantry combat rising food insecurity, and supported day schools’ preparations to reopen safely. These needs will continue.
CREATE A DONOR ADVISED FUND (DAF)
A Donor Advised Fund is an excellent way to set aside dollars that you plan to distribute over time rather than all at once. This is a particularly valuable tool if you are concerned about capital gains tax from non-recurring events or transactions and/or if you make multiple gifts to organizations throughout the year. For example, after the sale of a home, a donor may make a tax-deductible gift with some of those proceeds into a DAF and then use that fund to cover temple dues and annual campaign gifts over a number of years. In addition, a DAF streamlines the giving process and connects donors to expert philanthropic advisors.
A DAF allows you to make charitable gifts into the fund at any time while retaining the ability to make distribution requests from the fund to charitable organizations of your choice (Jewish or non-Jewish). You may also name your child(ren) as successor advisor(s) to your family fund. This type of fund may be established by an individual, a couple, or a family.
If you establish a new DAF through TJF with at least $7,500, TJF will match your gift with an additional $2,500, totaling $10,000 or more in your new fund. That’s an extra $2,500 with which you can make a difference.
— Naomi Limor Sedek