The “Fiscal Cliff,” a conjunction of tax and spending issues colliding at the end of the year, profoundly affects donors and constituents of the Saginaw Community Foundation.
Primarily, the issues at hand include:
– Expiration of the Bush tax cuts
– Expiration of the Payroll Tax holiday
– Enactment of the budget sequestration
– AMT patch expiration
– Unemployment extension expiration
– ACA unearned Medicare tax on interest, dividends and capital gains
– Debt ceiling expiration.
All issues combined, the fiscal cliff is the biggest absolute tax increase/spending cut in history, and, in relative terms, is as big as the tax act of 1942.
In anticipation of the fiscal cliff, some donors are evaluating their financial situation with their professional advisors. Some possible planning considerations include:
– Repositioning assets to Roth IRAs or IRAS, moving dividend stocks to IRAs and buying municipal bonds in taxable accounts.
– Offsetting a Roth conversion with a charitable deduction.
– Making appreciated stock donations to favorite charities or donor advised funds because one of the expiring Bush tax cuts phases out itemized deductions, including charitable contributions.
– Reducing the taxable estate with excluded gifts to family, including 529 plans for children or grandchildren’s education funds. Excluded gifts shrink the taxable estate.
If you have questions, contact your professional advisors or Reneé Johnston, president/CEO of the Saginaw Community Foundation, at (989) 755-0545. The Saginaw Community Foundation also can provide presentations and additional information, upon request.