2023 Year-End Tax Planning: What You Should Know

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As we approach the end of the year, it is helpful to reflect on steps that can be taken to reduce taxes.

The following are some possible end-of-year planning ideas, as well as the most significant legislative proposal that might affect individuals this year or beginning in 2024.

Use appreciated assets to make a charitable gift in 2023. As in previous years, gifts of appreciated stock remain a best practice. Such gifts not only provide you with a deduction for the full value of the asset but also avoid the capital gains tax that would apply if the assets were sold.

Consider donating to a DAF. If you are considering making a significant donation to charity over time, but want a deduction today, consider adding funds to an existing Donor Advised Fund or opening a new DAF. It can be especially beneficial to donate appreciated property because it eliminates the capital gains taxation with respect to the contributed assets. The Jewish Federation offers DAFs with competitive fees and attractive investment options.

Look into an IRA charitable rollover. The IRA charitable rollover permits the transfer of up to $100,000 per year from an IRA to charity, free of any income tax. In addition, such rollovers help satisfy the minimum distribution requirement. The minimum age for making the rollover is 70½.

Expansion of IRA Charitable Rollover Provision. Last December, Congress expanded the IRA charitable rollover provision to allow for a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts and charitable remainder annuity trusts.

Consider taking advantage of energy incentives in the Inflation Reduction Act. New, newly expanded and extended green energy incentives include tax credits for rooftop solar panels, insulation, electric vehicle purchases and energy-efficient home improvements. Each of these incentives has complex rules, so careful research is required.

Consider accelerating non-charitable gifts. The unified estate/gift credit of $12.92 million is scheduled to automatically reduce to around $7 million beginning with transfers made in 2026. Accordingly, taxpayers who intend to make significant family gifts (either during their lifetime or in the form of bequests) may want to consider accelerating some or all of those gifts early, as their resources permit.

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 with your tax adviser. We also recommend that you monitor the following legislative proposal as it may be considered by Congress later this year.

Expansion of the universal charitable deduction for non-itemizers. Proposed legislation 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 non-itemizers (about $4,600 for individual filers and $9,200 for a joint return). In lieu of this proposal, it is possible that a year-end legislative tax package could simply provide an “above the line” deduction of $300 ($600 for a joint return), similar to what was available for 2021.

Disclaimer: The Jewish Federation of Greater Philadelphia does not provide tax advice. Consult with your professional adviser before taking any action. If you have any questions, contact Director of Planned Giving and Endowments Jennifer Brier at [email protected] or 215-832-0528.


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