Tax Planning News and Ideas for 2022 Year End

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While there is always talk of changes in the taxes applicable to individuals, little has actually changed this year so far. The “Inflation Reduction Act” (Public Law 117-169), a slimmed-down version of “Build Back Better,” did not include many of the individual tax changes that the Biden administration originally proposed. The act, however, does include tax incentives relating to green energy.

Legislation aimed at boosting retirement savings gained significant traction in the House and Senate this year and was enacted in October. As a result, the annual retirement contribution amount was increased for retirement plans and catch-up provisions (for those age 50 and over) as well as Individual Retirement Accounts.

In addition, the following legislative proposals have been under consideration by Congress:

Expansion of the universal charitable deduction for nonitemizers. Proposed legislation (S. 618 and H.R. 1704) seeks to expand the universal charitable deduction first enacted in the CARES Act, the COVID relief legislation passed in March 2020. The proposed legislation would allow a charitable deduction of up to one-third of the standard deduction available to nonitemizers (about $4,000 for individual filers and $8,000 for a joint return). In addition, it is possible that a year-end tax package could provide an “above the line” deduction of $300 ($600 for a joint return) similar to what was available for 2021.

Expansion of the IRA Charitable Rollover. Bipartisan legislation that has passed the House (the Securing Strong Retirement Act, H.R. 2954) has been introduced in the Senate (Enhancing American Retirement Now Act, S. 4808). It would make changes to the IRA Charitable Rollover regime, indexing the current $100,000 rollover amount for inflation and permitting one-time transfers to charitable remainder trusts and gift annuities of up to $50,000.

Key considerations for year-end tax planning

Use appreciated assets to make a charitable gift in 2022. As in previous years, gifts of 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 donor-advised fund for maximum flexibility. If you are considering making a significant donation to charity over time but want a deduction today, consider adding funds to an existing 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. The Jewish Federation of Greater Philadelphia operates donor-advised funds and would be happy to assist.

Look into an IRA charitable rollover. The IRA charitable rollover is an attractive option because it can help satisfy the minimum distribution requirement without incurring income tax, even if you don’t itemize your 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. There are new and recently expanded and extended green energy incentives 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 noncharitable 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.

As with any significant tax and charitable planning, it is advisable to carefully consider potential changes in the context of your complete financial profile and to consult your tax adviser.

Endowment professionals at the Jewish Federation of Greater Philadelphia remain available to work with you and your other professional advisors to maximize the benefits of these and other tax-planning strategies for you and the Jewish community. For more information, contact Jennifer Brier, director of planned giving and endowments, at or 215-832-0528.E


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