Year-End Planning Tips for
Your Clients

By Jacqueline Yahr, Esq., Assistant Vice President, Charitable Planning

Tax Legislation Update

On September 13, the House Ways & Means Committee introduced a set of tax proposals as part of the House Democrats’ “budget reconciliation” package containing significant federal tax changes designed to raise revenue. On October 28, a revised “Build Back Better Act” bill (the “revised bill”) was introduced in the House of Representatives. That legislation, the byproduct of weeks of intense negotiation among Congressional Democrats and members of the Biden administration, significantly modified many of the tax-related provisions that were included in a bill approved by the House Ways & Means Committee on September 15.

With negotiations over the reconciliation package taking place, predictions over what tax changes will become law have proven to be quite difficult. However, it is fair to say that with Democratic majorities in the House and Senate, coupled with the commitment of the Biden Administration and the Democratic leadership in both the House and Senate to the major federal programs set out in the reconciliation bill and the revised bill and the tax changes designed to fund them, many provisions of the bill could pass. To read more about significant proposals in the House Ways & Means Committee Reconciliation Package and the Build Back Better Act, as well as the  as well as other significant legislation changes, please CLICK HERE.

The following are key considerations for year-end tax planning given the uncertainty of the passage of the tax legislative proposals:

  • Determine if (and how much) the 5% surtax will affect your client. With the elimination of the increase to the ordinary income tax rates, you must now only consider if your client has significant income in excess of the $10 Million threshold, since the revised bill proposes a 5% surtax on the amount an individual taxpayer’s “modified” adjusted gross income (AGI) is in excess of $10 million. The surtax means it may be beneficial to defer deductions (including charitable deductions) to 2022 and beyond. However, with the elimination of the increases to the ordinary income tax rates, to the standard “tried and true” year-end tax planning mantra of deferring income and accelerating deductions to reduce the current year’s bill can have significant time-value-of-money benefits.
  • Use appreciated assets to make a charitable gift in 2021. As in previous years, gifts of appreciated assets (stock) remains a best practice. With the continued bull market, charitable donations of appreciated property are more valuable than ever, providing not only a charitable deduction but also the potential to avoid the higher capital gains tax.
  • Open or Add to a Donor Advised Fund (DAF) this year for maximum flexibility. If your clients are considering making a significant donation to charity over time but want a deduction today, this may be the last year to utilize the current flexibility provided by a DAF. It can be especially beneficial to donate appreciated property, because by doing so your client avoids capital gains taxation forever. Consider recommending your client add to an existing DAF or CLICK HERE to learn about opening a DAF at The Associated.
  • Charitable donations of cash may be useful if offsetting a large portion of taxable income. 2021 likely will be the last year you can use a charitable donation of cash to offset more than 60% of your adjusted gross income. For those in a position to make a significant charitable gift of cash, this may provide an opportunity. Note that contributions in excess of 60% of AGI cannot be made to a DAF.
  • Look into an IRA charitable rollover. The IRA charitable rollover is an attractive option because it can satisfy the RMD requirement without incurring income tax, even if your client does not itemize their deductions. Depending on whether proposed legislation expanding the rollover amount and allowing rollovers to charitable remainder trusts and gift annuities is enacted, this option could become even more attractive in future years.

As with any significant tax and charitable planning, you should always carefully consider potential changes in the context of your client’s complete financial profile. We also recommend that you monitor the above legislative proposals as they will be considered by Congress later this year. Should any significant legislation be approved, we will communicate those changes to you and provide suggestions for charitable giving.

The Associated’s professionals are ready to work with you and your clients on ways to help maximize the financial and charitable benefits of any charitable planning strategies. 

For more information, contact Jackie Yahr at 410-369-9248 or

This is for informational purposes only and should not be construed as legal, tax or financial advice. When considering gift planning strategies, you should always consult with your own legal and tax advisors.

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