Professional Advisors Newsletter December 2021

Happy Holidays!

I can only imagine how anxious your clients must be to gain clarity about tax reform. That’s why in this newsletter we’ll look at two specific items:
  1. Year-end giving: What you should be telling your clients
  2. Tax reform: What’s the latest and how could it impact charitable giving?
Jennifer McComb
CEO, Community Foundation of the Florida Keys
305-809-4991 direct
305-587-1888 cell
Email here

Year-end giving

It’s the season for tax planning. Below are three key tax strategies for your clients:

  1. Don’t let clients miss out on the few provisions of the 2020 CARES that carried over to 2021. The ability to deduct up to 100% of adjusted gross income (AGI) for cash gifts made directly to qualifying charities and the universal charitable deduction of $300 per taxpayer ($600 for a married couple).
  2. Unlike in 2020, when pandemic relief laws offered a tax break, this year your clients must take required minimum distributions from their qualified retirement accounts. Especially for clients who take the standard deduction, they should consider a qualified charitable distribution, which allows eligible individuals to donate up to $100,000 directly from individual retirement accounts to a qualified charity. The Community Foundation is happy to help your client identify a qualified charity or structure a qualifying fund to receive a distribution.
  3. Bundling multiple gifts into tax year 2021 can help your clients who have had exceptionally high incomes this year. Donor-advised funds at the Community Foundation are particularly useful in these situations. We’d love to discuss this option with you client.

We know you strive to identify the optimal tax strategies for each client’s charitable giving. As always, please contact us to find out how we can make year-end tax savings as easy as possible for you and your clients.

Tax reform: What your charitable clients need to know about tax reform

  1. Where charitable giving is concerned, the proposed new surtax is not something that can be avoided or reduced through charitable deductions. That is because the proposed 5% surtax on taxpayers worth more than $10 million in AGI is assessed on just that – adjusted gross income. Below-the-line deductions won’t help. Furthermore, an additional 3% surtax has been proposed for taxpayers with more than $25M in AGI.
  2. In addition, under this new proposal, pass-through entities, such as S corporations and partnerships, are still the subject of a 3.8% Net Investment Income Tax, as was the case under the prior version of the revenue package. Under the new proposal, this tax would be expanded to taxpayers with taxable income of $400,000 or more ($500,000 for joint filers).
  3. Of interest to professional advisors who represent businesses and business owners, under the proposed new law, a 15% “corporate minimum tax” would apply to “book income” of corporations earning profits greater than $1 billion. For your clients who’ve historically relied on income tax credits, this is an important provision to watch because income tax credits would not be as valuable as they are now.
  4. If the legislation is passed as written as of September 13, 2021, high net-worth clients could be significantly impacted by the proposed limitation on “stock exclusions” under Internal Revenue Code Section 1202. For taxpayers with adjusted gross income of $400,000 or more, and for estates and trusts, only the 50% exclusion provision would remain. The 75% and the 100% exclusion would no longer be available.

No one gives away a dollar to save 50 cents

No matter how aggressive the planning strategy and the resulting tax savings, your clients almost certainly would have more money for themselves and their families if they didn’t give money to charities. They probably don’t take their charitable giving lightly and intend for their charitable dollars to make a difference in the causes they care about. The Community Foundation has its finger on the pulse of the needs in our county and which organizations are helping and how.

See where Forbes list of the 25 most philanthropic billionaires give their charitable dollars.

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