April 9, 2024
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Linking Northern and Central NJ, Bronx, Manhattan, Westchester and CT

Maximize Your Impact: Tax Savings With Smart Charitable Planning

(Courtesy of Jewish Federation of Northern NJ) It’s tax season–the perfect time not only to review last year’s income, but also to consider what tax strategies you can use in 2024.

Here are some popular ways to maximize the tax benefits of your tzedakah.

 

Open or Contribute to
A Donor-Advised Fund (DAF)

A Donor Advised Fund is a tax-smart and simple solution for charitable giving. Think of a Donor Advised Fund as an investment account dedicated exclusively to tzedakah. When you contribute appreciated stock, cash or other assets to a DAF, the gift amount can be taken as a charitable deduction (if you itemize) in the year you make the gift, and you can decide later where it goes. DAFs are ideal for “bunching” multiple years of charitable gifts into a single year so that you can meet the necessary thresholds to itemize deductions on your federal income tax return. Then, in the alternate years, take the standard deduction.

There are other benefits to a DAF, like simplifying and organizing your charitable giving. And DAF income and investment returns are credited to your fund, income tax free.

A DAF established with Jewish Federation can help you carry on your philanthropic legacy. You can either name your kids as “successor recommenders,” so they also will have a dedicated charity account. Or you can name Federation and other charities as the ultimate beneficiary of your DAF after your lifetime.

 

Donate Appreciated Securities Or Crypto Currency

Instead of cash, consider donating stocks, bonds, Bitcoin or mutual funds that have gone up in value (and that you have owned for more than one year). This allows you to take a tax deduction for the full value of the investment without paying taxes on the gains. You can use this strategy to give directly to charity and/or to contribute to your Donor Advised Fund. Especially right now, while Bitcoin is at an all-time high and the stock market has enjoyed strong performance, these could be ideal choices for your charitable giving. Federation can accept these special assets.

 

Use Your IRA to Make a Qualified Charitable Distribution (QCD)

If you’re 70 ½ or older and have a traditional IRA, you can donate up to $105,000 directly to charities from your IRA in 2024 without paying taxes on the withdrawal. If you’re over 73 ½, the added benefit is that this amount will both count towards your Required Minimum Distribution (RMD) and be excluded from your federal taxable income.

IRAs are also an effective charitable planning tool for future charitable giving. Simply complete an IRA beneficiary designation form naming Federation and other favorite charities as the ultimate beneficiaries of your plan to carry on your charitable legacy after your lifetime. Be sure to tell the charity so they can thank you for your generosity!

Clearly, IRAs are a great source to consider for tax-smart charitable planning now and in the future.

These are just a few ways to make a difference while also saving on taxes. Remember to talk to your financial advisor or tax professional to see how these strategies fit with your own financial situation. By incorporating charitable planning into your financial plans, you can make a bigger impact on the causes you care about while also keeping more money in your pocket.

Jewish Federation impacts Jewish life each and every day. Our four pillars of work are advocating for and supporting Israel, combating antisemitism and securing our community, caring for others, and strengthening Jewish identity.

Jewish Federation of Northern New Jersey does not give legal or tax advice. The views expressed here are neither intended nor written to be used, nor can they be used, as professional advice. Donors seeking tax and legal advice on which they may rely should consult their own professional advisors.

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