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Endowment tax is the taxation of financial endowments that are otherwise not taxed due to their charitable, educational, or religious mission. Endowments can be up to several billion dollars at some universities , some charitable foundations , and some medical foundations.
In 2017, a federal endowment tax was enacted in the Tax Cuts and Jobs Act of 2017 in the form of an excise tax of 1.4% on institutions that have at least 500 tuition-paying students and net assets of at least $500,000 per student. The $500,000 is not adjusted for inflation, so the threshold is effectively lowered over time.
Engraving of Harvard College by Paul Revere, 1767. Harvard University's endowment was valued at $53.2 billion as of 2021. [1]A financial endowment is a legal structure for managing, and in many cases indefinitely perpetuating, a pool of financial, real estate, or other investments for a specific purpose according to the will of its founders and donors. [2]
Private institutions with very large endowments, such as Harvard University, pay a 1.4% excise tax on net endowment investment income.
A modified endowment contract (MEC) is a cash value life insurance contract in the United States where the premiums paid have exceeded the amount allowed to keep the full tax treatment of a cash value life insurance policy. In a modified endowment contract, distributions of cash value are taken from taxable gains first as compared to ...
Under this rule, as explained by NerdWallet, you would allocate 50% of your after-tax income to pay for necessities including groceries, housing, utilities, transportation, insurance, any child ...
Donor-advised funds do reap a significant cost advantage (foundations carry a 2.5–4% of assets overhead expense to maintain, a 1–2% excise tax on NET investment earnings and a required 5% spending of assets each year) but may also have one more drawback: a limited lifetime, although this varies depending on the sponsor.
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