As the U.S. federal government approaches the January 1 “fiscal cliff” deadline, there continues to be discussion around closing tax “loopholes” in an effort to increase tax receipts. As has been discussed previously, the charitable gift deduction has gotten swept up into this conversation. It would appear that there are 4 ways in which the charitable gift deduction could be limited or reduced come 2013:
- Place a dollar cap on all allowable deductions – including charitable gifts;
- Reduce the value of the charitable deduction for upper-income folks by limiting their deductions to the 28% bracket rather than than the higher 2012 marginal tax brackets of 33 and 35% (which will be 36 and 39.6% respectively if the Bush-era tax cuts are allowed to expire);
- Place a 2% of adjusted gross income floor for the charitable deduction coupled with with a 15% cap (or they may use some other percentages);
- Allow a 12% tax credit in lieu of a charitable deduction.
There is no doubt that difficult decisions will need to made in the coming weeks, months, and years to reshape the U.S. economy and fiscal environment. But this is far from the first time our country has had to make similarly difficult decisions.Read entire article.