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July 2023
Hope you are well and enjoying the summer.
Alternative Minimum Tax (AMT)
Only 6 months away, the impending Alternative Minimum Tax (AMT) rule changes on January 1, 2024, is finally getting more much-deserved attention.
Most of Canada’s Philanthropy community remains unaware of the significant risk to their fundraising. Less money will reach charities because generous people will no longer enjoy the same tax benefits.
Canadian charities risk losing millions of donation dollars from AMT because the proposed rule changes will eliminate some of the tax advantages for people who help the causes they are passionate about.
These resources can you help you get up to speed and get ahead of this for donors and generous clients:
Foundation Magazine: ”The Alternative Minimum Tax”
Wealth Professional: “Will new AMT proposals crimp Canadians’ charitable giving”
Cadesky Tax: “Taxpayers and Charities Beware: A New AMT is Coming”
The TaxLetter®: “Bad News For HNW Donors & Charities”
We are working with over 60 charities across Canada and have provided two versions of emails for them to modify and send to donors so that donors can plan accordingly. If they know about these options, hopefully it will translate into larger current gifts before Jan 2024.
Version #1
Proposed Changes to the Alternative Minimum Tax (AMT): How it May Affect You and Your Charitable Giving
Dear Donor,
The 2023 Federal Budget proposed significant changes to the Alternative Minimum Tax (AMT) system that will be effective January 1st, 2024.
Introduced in 1986, AMT was meant to ensure that a minimum amount of tax would be paid by individuals who benefitted from preferential tax treatment for income or tax deductions for example: those receiving dividend income, capital gains and using deductible credits.
Going forward, the proposed changes will especially impact individuals with large capital gains, or who have significant tax deductions through charitable donations. For example, 30% of capital gains on donations of publicly-traded securities, which under current rules are not subject to any tax, and an increase of the capital gains inclusion rate from 80% to 100% will all be added to AMT calculations.
The good news is that AMT will have no impact on final estate taxes where charitable donations can still be used to mitigate 100% of estate taxes including going back the prior year. That means for every $2 given to charity, $1 of tax is turned into charity.
Here are some planning considerations you may want to discuss with your professionals now to take advantage of the changing situation:
- Donate appreciated non-registered public securities (eg stock, mutual funds, ETFs) to YOUR CHARITY in 2023 without AMT impact.
- Pre-fund a private foundation or Donor Advised Fund (DAF) in 2023 using appreciated securities and make distributions to YOUR CHARITY and/or other registered charities in Canada anytime thereafter
- Consider exercising any planned liquidity events (e.g. sale of a business or investment real estate) in 2023 to avoid increased capital gains tax inclusion and use charitable donations in 2023 to mitigate the tax.
- Consider meeting with our Legacy Process Consultant Mark Halpern, CFP, TEP, MFA-P of WEALTHinsurance.com, and learn how to include Strategic Philanthropy in your estate planning to turn taxes into charity. Mark can also help create more tax-efficient and cost-effective ways to give charity now compared to using cash, cheques and credit cards. He is available to work with you and your advisory team on a no-fee basis.
Please be in touch if we can be of help
Version #2
Proposed Changes to the Alternative Minimum Tax (AMT) May Affect You and Your Charitable Giving
Dear Donor,
The proposed changes, effective January 1st, 2024, will likely increase your taxes, hurt Canadian charities, and reduce the tax benefits of generous charitable giving. In particular, taxpayers receiving dividend income, earning capital gains, and using deductible tax credits like charitable donations will be hardest hit. We recommend that you contact your financial advisors to see now how you can reduce the negative impact and help you take advantage of the changing situation.
You may also want to consider a no-obligation meeting with our Legacy Process Consultant, Mark Halpern, CFP, TEP, MFA-P of WEALTHinsurance.com, and learn how you can include Strategic Philanthropy in your estate planning to turn taxes into charity. Mark can also help create more tax and cost-effective ways to give to charity now compared to using cash, cheques, and credit cards. He is available to work with you and your advisory team on a no-fee basis.
Please be in touch if we can be of help
Missed Opportunities
My latest article published in the TaxLetter®, titled “Missed Opportunities” is one of the most important articles that I have written to date. It describes the recent case of a family with a big estate tax liability and the psychological “baggage” that many UHNW clients carry around about Life Insurance and charitable planned giving.
Spoiler alert: they chose to pay more than $16 million of taxes versus creating a family legacy of more than $33 million of charity, just by converting taxes into charity.
Read the dramatic details here: https://lnkd.in/gFqHB997 (Note that exact facts were altered to protect confidentiality)
Now more than ever, people need to include Strategic Philanthropy using Life Insurance as part of their estate planning, especially now that we know AMT will not have any impact on final estate taxes.
Philanthropy Fridays on LinkedIn
I’ve been hosting “Philanthropy Friday” webinars on LinkedIn Live on alternating weeks from 12:00-1:00 pm EDT.
Alexandra (Ali) Spinner, Partner in Crowe Soberman’s Tax Group was my guest on a recent episode titled “Changes to AMT - Bad News For Philanthropy”.
Watch our discussion of the proposed AMT changes: https://www.youtube.com/watch?v=WUu1VMW4FvA
In another recent LinkedIn Live I discussed: 10 Effective Strategies to Become an Entrepreneurial Philanthropist
Upcoming Episodes:
Friday, Aug 11 - Charitable Strategies That Make You Go WOW
Friday, Sep 8 - with guest Jim Ruta, co-founder PowerOfPlatinum
Friday Sep 22 - with guest Denise Castonguay, Founder & CEO of Canada Gives
Friday Oct 13 - with guest Tim Cestnick, Co-Founder & CEO of Our Family Office Inc.
Please connect with me on LinkedIn to ensure you receive timely announcements, event notices, etc. and let me know of any special subjects you would like covered or would like to be a guest.
Please be in touch if you have any questions or suggestions
Thanks in advance
Mark
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