More On Tax Planningfrom The Advisor's Professional Library
- Selected Provisions of the American Taxpayer Relief Act of 2012 The experts of Tax Facts have produced this comprehensive analysis of selected provisions of the American Taxpayer Relief Act of 2012 (the Act) to provide the most up-to-date information to our subscribers. This supplement analyzes important changes to the tax code with emphasis on how these developments impact Tax Facts’ major areas of focus: Employee Benefits, Insurance, and Investments.
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
The Obama administration’s proposal to limit tax savings for itemized deductions, including those for charitable contributions, would prompt donors to reduce their gifts by $9.4 billion a year, according to a study by the American Enterprise Institute.
Arthur Brooks, the conservative think tank’s president and author of the study, told nonprofit leaders on Capitol Hill this week that the reduction would cause “massive” harm to their sector, The Chronicle of Philanthropy reported Thursday.
Limiting tax savings on itemized deductions to 28%—down from the current 39.6%—would cause charitable donations to fall by 4%, Brooks said.
He predicted that the top 1% of earners would lose their incentive to give, and would reduce their donations by about 24%.
The Chronicle noted that AEI’s estimate of the effects of a 28% limit were larger than in previous studies.
A 2011 Tax Policy Center’s analysis put the gift reduction at between $1.7 billion and $3.2 billion a year. The same year, Indiana University’s philanthropy center said charitable giving would have dropped by $3.2 billion over 2010 and 2011 combined if the 28% limit had been in effect.
In both these cases, The Chronicle said, the reduced giving would represent only a fraction of the $229 billion living Americans gave to charity last year.
The Chronicle reported that Brooks presented preliminary findings of his study to charities and foundations that are part of the 60-member Charitable Giving Coalition.
The coalition is urging Congress to be cognizant of nonprofits as the Dec. 13 deadline approaches for a House-Senate committee to come up with a fiscal 2014 federal budget.
Members are concerned that, even as prospects for a tax overhaul this year are dismal, a “template” for cutting the value of the charitable deduction will reappear in future deliberations.
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