One of the biggest incentives available for charitable giving is in danger, due to a possible change to IRS Tax Code. President Obama has proposed a 28% cap on charitable donations by high-income donors. This could potentially reduce giving to nonprofits, and therefore reduce their effectiveness and ability to combat problems governments and other institutions are unwilling or unable to work on.
Those donors whose incomes exceed $200,000 (or $250,000 for joint filers would be affected by the change. Donors whose incomes exceed $1 million would be subject to the Buffet Rule, which imposes a 30% tax on those taxpayers. For them, the charitable deduction is the only available deduction.
Three other provisions in the tax code that encourage charitable giving were reinstated, as of December 19, but will be allowed to expire as of January 1, despite broad bipartisan support:
- The IRA Charitable Rollover, which allows taxpayers 75 years and older to donate up to $100,000 from their retirement without incurring any taxes on the withdrawal.
- A provision that allows for incentives to donate land conservation easements
- A provision that encourages businesses, restaurants, and farmers to donate unused food
The much-touted “economic recovery” hasn’t reached many Americans, and removing incentives for taxpayers to donate to charitable causes is just wrong. If anything, we need to make charitable giving easier — governments are slashing budgets, and the additional capacity provided by our nonprofits is needed more than ever.