Lower your tax bill before year's end

Here are some strategies to reduce your 2017 tax liability and help the Jewish community. We can help you meet both goals through financial planning and charitable giving.

Financial Planning
1. Lifetime Gifts

Reduce your estate by making lifetime gifts of up to $14,000 (or $28,000 if husband and wife) to children, grandchildren or any family members or friends. 

2. Take Losses and Defer Income

Sell investments which have suffered losses to offset taxable gains from profitable investments. Unused capital losses can offset ordinary income up to $3,000 and can be carried forward to later years.

Postpone salary or bonuses to next year if you will be in a lower tax bracket next year.  If that is not possible, open a Donor Advised Fund (DAF) at the Jewish Federation (see below). A DAF is also a good idea if you think you may not be itemizing deductions next year due to the proposed tax bill which is doubling itemized deductions.

Accelerate income to this year if you think you will be in a higher tax bracket next year. 

3. Fund Your Retirement Account

Fund your retirement accounts. If you are under 50, you can contribute a maximum of $18,000 to your 401(k) and if you are over 50, you can contribute $24,000. 


Consider converting a Traditional IRA to a Roth. You will have to pay taxes up front but the fund will grow tax free so distributions in the future will not be taxed. Even if your contributions to an IRA are not deductible (because your income is in excess of $100,000), you can still make non-deductible contributions of up to $5,500 to a Traditional IRA ($6,500 if you are 50 or over) and then convert it to a Roth.

5. Fund A 529 Plan

Establish a 529 plan for your children or grandchildren to fund their education.

The account will grow tax-free and will not be subject to taxes when distributed to pay for higher education.

Charitable Giving
1. Make Charitable gifts with appreciated assets

Use appreciated stocks (held for more than 1 year) to make a charitable gift.  This will allow you to bypass capital gains tax and still receive a deduction for the full fair market value of the stock donated.

2. Establish A Donor-Advised Fund at the Jewish Federation

Establishing a DAF allows you to have a fund to make charitable distributions to the charity of your choice in the future but get an immediate deduction this year. You can open a DAF with as little as $1000 in cash or appreciated stock.   As discussed above, using appreciated securities will give you a double benefit since it will allow you to bypass capital gains taxes on the appreciation but you will still get a charitable deduction. It is easy to establish such a fund at the Federation, where your gift will be professionally managed and the fund grows tax-free, allowing you to leverage your charitable giving. 

A DAF is also a great way to get a charitable deduction this year if you want to lower your tax bill but are not yet sure which charities you want to benefit. It is also a great time to establish a DAF if you think you may not be itemizing deductions next year because of the increased amount under the new tax proposals.   It is also a great alternative to a private foundation.

3. Make a Tax Free Charitable Gift From Your IRA

If you are over 70½, you may make a distribution from your IRA to qualified charities, such as JUF Annual Campaign or The Centennial Campaign, without incurring any taxes. The gift must go directly to the charity and may not go to a donor-advised fund, supporting organization or private foundation. The maximum distribution allowed is $100,000 annually. The contribution is not tax deductible but it does count toward your required minimum distribution requirements.

Ordinarily, distributions from IRAs are subject to double taxation upon death. First they are subject to income tax and then they are subject to estate tax. As much as 70% of your IRA may end up going to the IRS.  By making your charitable gift from your IRA now, the distribution is tax free and you are removing the asset from your estate. Consider paying off outstanding pledges, making a multi-year gift or supporting a capital project.


For more information, please contact a Jewish Federation professional at (312) 357-4853 or legacy@juf.org.

This is for information purposes only and is not meant to be a substitute for legal or financial advice. Please consult your professional adviser regarding your individual situation.


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