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Significant Tax Changes Likely
PRESIDENT JOE BIDEN’S “Build Back Better” bill
was just passed by the House of Representatives and
is now on its way to the Senate, where it will likely be
negotiated and revised. While it is difficult to predict
what additional updates will be made to the bill,
individuals should consider the following potential
changes as they make year-end tax decisions:
rates, charitable donations of appreciated property
are more valuable than ever, providing not only
a deduction to the donor but also the potential to
avoid the higher capital gains tax.

• Amir Goldman, chair of the Jewish Federation’s
Investment Committee, commented that “donating
appreciated stock is a fantastic way for you to support
critically important institutions in a tax-efficient
1. Increase in top income tax rates and capital gains
manner. For Pennsylvania residents, the highest
tax rates, and decrease in the estate and gift tax
long-term federal income tax is 23.80%, plus a 3.07%
exemption. The originally proposed bill contained
Pennsylvania resident tax on capital gains. So if a
provisions that would significantly increase the top
Pennsylvania donor can donate appreciated stock,
marginal income tax rates and top capital gains tax
they will save 26.87% of taxes on the gains. What a
The Build Back Better bill will likely be updated with
that should be considered for year-end tax
rates for individual taxpayers with adjusted gross changes
wonderful opportunity to do good and have your
decisions. Courtesy of Getty Images
income (AGI) in excess of $400,000. It also reduced
resources make a larger impact!”
the unified estate and gift tax exemption from $11.7 million to the 2010
• Consider the impact of the potential SALT cap increase on your tax situa-
exemption level of $5 million. The latest version of the bill eliminates those
tion. If the provision is passed and effective in 2021, this may be a good year
provisions. to increase your charitable giving, perhaps with appreciated stock (see above),
2. Surtax on millionaires and billionaires starting in 2022. For joint filers, the
and take advantage of itemizing your deductions.

extra tax would equal 5% of modified AGI from $10 million to $25 million
• Consider accelerating noncharitable gifts. The possible decrease to the
and would jump to 8% of modified AGI above $25 million.

unified estate/gift credit would apply to transfers that occur after Dec. 31.

3. 3.8% surtax expanded to cover net investment income derived in the
For taxpayers who are intent on making significant gifts (either during their
ordinary course of a trade or business for single or head-of-household filer
lifetime or in the form of bequests), accelerating those gifts may provide a
with a modified AGI over $400,000, a joint filer with a modified AGI over
significant tax advantage.

$500,000 or a married person filing a separate return with a modified AGI
• Charitable donations of cash may be useful if offsetting a large portion
over $250,000.

of taxable income. 2021 likely will be the last year you can use a charitable
4. SALT cap increased to $80,000. The latest version of the bill contains a provi-
donation of cash to offset more than 60% of your adjusted gross income. This
sion that rolls back the state and local tax (SALT) deduction limit. The 2017 tax
may provide an opportunity for taxpayers who are in a position to make a
reform law placed a temporary $10,000 cap on the itemized deduction for state
significant charitable gift. Note that contributions in excess of 60% of AGI
and local taxes until 2026. By limiting the deduction, the cap tends to increase
cannot be made to a Donor Advised Fund (DAF), so plan carefully to balance
taxes paid by wealthier people, who typically pay more state and local taxes
DAF and non-DAF contributions.

and customarily itemize instead of claiming the standard deduction. Under
• Look into an IRA charitable rollover. The IRA charitable rollover is an
the Build Back Better Act, the cap would be extended through 2031 but would
attractive option because it can satisfy the RMD requirement without incur-
ring income tax, even if you don’t itemize your deductions. Depending on
increase to $80,000 for 2021 to 2030 (and return to $10,000 for 2031).

whether proposed legislation expanding the rollover amount and allowing
In addition, the following changes will be effective for 2022 unless Congress
rollovers to charitable remainder trusts and gift annuities is enacted, this
option could become even more attractive in future years.

acts by the end of this year:
• An end to the expanded charitable deduction for itemizers. COVID relief
legislation passed in 2020 provided that charitable contributions made in cash
to most charities were generally deductible to up to 100% of a taxpayer’s gross
income, rather than the usual 60%.

• Required minimum distributions (RMDs) are back. For 2020, the CARES
Act suspended the requirement that those who are 70½ or older take an RMD
from certain retirement accounts (including IRAs, 401(k)s and Roth 401(k)
s). This requirement is back for 2021 (though it applies beginning at age 72).

RMDs from IRAs and 401(k)s are taxable income.

Key Considerations for Year-End Tax Planning
• Use appreciated assets to make a charitable gift in 2021. As in previous years,
gifts of appreciated assets (stock) remain a best practice. With the continued
bull market and the possibility of a retroactive increase in the capital gains tax
JEWISHEXPONENT.COM 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. Please also continue to monitor the above legislative proposals that will
be considered by Congress later this year.

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, please contact Director of
Planned Giving and Endowments Jennifer Brier at jbrier@jewishphilly.org or
215-832-0528. Content is for informational purposes only and should not be construed as
legal, tax or financial advice. When considering gift planning strategies, always
consult with your own legal and tax advisers.

JEWISH EXPONENT
DECEMBER 2, 2021
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