President Obama Proposes to Tax Charitable Giving by the Wealthy?

I have been closely following various proposals impacting nonprofits since the late 1990s. So, based on lots of experience, I can tell you right now that Presidential budget proposals in particular give me very little reason for concern (President Obama’s even more so). These budgets proposals go nowhere.

Yet, it is disappointing again to report that the Obama administration has stuck in again (for the 5th year in a row!) a proposal to cap income tax deductions at 28%. Here is my commentary from two years ago on this ridiculous idea. Why in the world do they keep sticking it in? What is their obsession with this sneaky, back door tax on charitable givers?

The Planned Giving Blog

As part of the President’s FY 2012 budget proposals, the Administration is proposing to decrease the value of charitable deductions and all other itemized deductions for individuals earning over $200,000 and couples earning over $250,000.

For these higher earners, this proposal caps off deductibility at 28% for charitable gifts and all other itemized deductions including mortgage interest and state/local taxes. In other words, these individuals, likely in the highest federal income tax bracket of 39.6% (also proposed), would only be able to receive tax credit for 28% of the value of their itemized deductions.

A real dollar example:  A donor who makes a fully deductible charitable gift of $100,000 who is in the top federal tax bracket of 35% (current highest bracket) under today’s law would reduce his/her taxable income by $100,000 and thereby save $35,000 in taxes.  This some donor, under the proposed law, would only be able to…

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