Deduction Limitations Impact Wealthy Donors

Although some areas of the taxlaw became better after the fiscal cliff deal, now that the laws are morepredictable, other areas took a hit – namely charitable giving and donorsthemselves.

The Fiscal Cliff Dealreintroduces the Pease Amendment, so named after former Congressman DonaldPease. Forbes recently wrote aboutthis in an article titled “Pease Limitation Puts A Lid On ItemizedDeductions For Wealthy Folks.”Indeed, as you can tell by the title of the article, the Pease Amendment isjust one more of those “stealth taxes” working to decrease deductions ratherthan increase taxation. In this case, for example, this stealth tax chips awayat the charitable deductions for high-earners.

For taxpayers with adjustedgross incomes (AGI) above $250,000 (or above $300,000 for joint filers), theywill see an itemized deduction limitation kick in that is the lesserof (a) 3% of the adjusted gross income above the applicable amount, or (b) 80%of the amount of the itemized deductions otherwise allowable for the taxable year.

Among other itemized deductions,this hits the charitable deduction, deductions for mortgage interest,deductions for various lower level taxes, and so on with some specificexclusions. That can start to really add up in a year when you happen to havean increase in your AGI.

So, the tax game has gotten abit more complex, and charitable giving has fewer tax deduction rewards forsome individuals these days. Do you think this will impact the amount ofcharitable giving for 2013? Only time will tell.

Understanding the complexities of TaxPlanning is just a part of successful estate planning. To ensure a successfulplan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2)take the time to get to know you, your family, your desires, your concerns,your goals, and your potential problems; 3) gladly and patiently answerquestions until you understand the concept or issue; and, 4) based onexperience with the problems and results caused by poor planning, help youdesign and implement the plan that fits your concerns and goals. Remember, goodplanning is no accident.


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