In August's featured article, we share updates on legislative tax provisions, SECURE 2.0 and long-term strategies that are mutually beneficial for your clients and the Kalamazoo County community.

Reconciliation legislation is back in play, and while it includes a few tax provisions (e.g., adding a corporate minimum tax and eliminating the carried interest tax break), the legislation is far less sweeping than reforms proposed in earlier versions. Notably, the includes $80 billion in budget increases for the Internal Revenue Service, which will help shore up the IRS’s expertise and pay for enforcement efforts to collect taxes. Both taxpayers and their advisors can likely expect greater scrutiny from the IRS on complex or aggressive transactions in the years ahead.

Comparison of deficit reduction
Upcoming tax reforms include a reduction in the deficit through corporate minimums, drug pricing and IRS tax enforcement. Spending targets include energy and climate alongside healthcare.

We know that Kalamazoo County's philanthropic individuals, families and their advisors are also continuing to watch the status of SECURE 2.0 because of the enhancements it proposes to the rules for Qualified Charitable Distributions. SECURE 2.0 could pass through Congress by the end of the year.

While tax reform through budget reconciliation legislation may be top of mind for you and your clients, it’s also important to remember that the Tax Cuts and Jobs Act of 2018 (which seems like a long, long time ago!) included several changes to the tax rules for individuals that are set to expire after the close of the 2025 tax year.

Unless those provisions are extended, the sunsets could impact tax planning for philanthropic clients in our community. For example, the standard deduction will decrease by nearly half, adjusted for inflation. This means some clients may once again itemize their deductions, thereby influencing charitable giving income tax strategies.

Estates upward of $6 M could be subject to estate tax if current thresholds expire, increasing the number of Americans who itemize.
The estate tax threshold could be lowered if current provisions expire.

In addition, the estate and gift tax exemption amount, increased under the Tax Cuts and Jobs Act, will be cut down so that in 2026 the exemption amount will be approximately $6.2 million adjusted for inflation. This will impact not only estates valued above the current exemption amount of $12.06 million but also estates valued in the $6 to $12 million range.

Because assets transferred through lifetime gifts and bequests to charitable organizations are not subject to gift or estate tax, philanthropy may be an effective tax planning tool for even more taxpayers after 2025. 

As your clients begin to set their philanthropic goals for the next several years, the team at the Kalamazoo Community Foundation is happy to help structure long-term strategies to maximize not only your clients’ tax benefits, but also the benefits to the community.

Our professionals are deeply familiar with the short-term, mid-term, and long-term needs of our community, as well as the nonprofits that are working to address those needs. Our experienced team works with you to help your clients support community needs now and in the future through clients’ donor-advised funds, field of interest funds, designated funds, and other vehicles established at the Kalamazoo Community Foundation.

We strive to align the interests of everyone involved: your client, the charities your client wants to support to improve our community and you in your trusted role as the client’s advisor.

Are your clients looking to update their philanthropic giving strategy and maximize positive impacts in the community? We can help advise on the best strategy to give to our unrestricted Love Where You Live Greatest Needs fund. Contact Donor Relations Officer Cindy Trout at ctrout@kalfound.org and set up a time to chat!