taxes

Pease is gone!! What was that anyway?

The new tax plan eliminates the Pease limitations!  Did you even know it existed? Was it important?

“This provision, named after the late Congressman Donald Pease, reduceD the value of itemized deductions for high income taxpayers. It worked by reducing the value of a taxpayer’s itemized deductions by 3 percent for every dollar of taxable income above a certain threshold ($254,200 single; $305,050 married). The phase-out of the value of itemized deductions is capped at 80 percent of the total value of itemized deductions.”  Click here if you want to see a good blog post on it. (I made the quote in past tense)

Basically, Pease was a surtax on charitable giving for those around $250,000 and up!  (it impacted all deductions but the charitable deduction is the most discretionary of the deductions – the one someone at that income level may think twice about a larger gift (if notified by their accountant of the surtax).

Yes, it is so complex that I can’t remember how it was calculated (why bother figuring it out again now that it is gone!) BUT this change, as well as a bunch of other “goodies” in the new tax bill, may be big opportunities!!!

Want to learn more about opportunities for nonprofits (and some challenges) due to the new law?  THIS MONDAY AT NOON est, I AM GIVING A BRIEFING ON THE NEW LAW!!! CLICK HERE TO REGISTER – WE WILL BE GOING OVER 20 IMPORTANT CHANGES TO THE LAW THAT MAY HELP YOUR ORG RAISE MORE MONEY.

 

 

 

 

Married Couples with AGIs of $60,550 to $72,500 Watch Out!

Not knowing what will be with the expiration of the Bush tax cuts is finally getting some notice in the media – to put it mildly.  Just trying to sort out what will happen is no simple task and something I am furiously working on (from the charitable gift planning perspective).

In my initial research into these issues , I discovered something very disturbing – nothing to do with charitable giving but I strongly suggest reading this article carefully if you and your spouse earn up around $100,000 in total.

For married couples with adjusted gross incomes (AGIs) between $60,550 to $72,500, the impact of the expiration of the Bush tax cuts (which will happen if the President and the House can’t come to terms soon) will be incredible.  The increase in actual tax dollars in 2013 from this group will be between $7,871 and $9,425 for each household.  How is that for a group that is probably struggling already to pay bills?

In other words, if this ends up being your AGI (and it is hard to tell because AGI is only really known after knowing your deductions when doing your taxes), you might owe the IRS between $655 and $785 extra a month – in addition to your current living expenses.

How do I know this?  Simple math.  Under the current law, this AGI range for married filing jointly pay at the 15% federal bracket level.  Come January 1, 2013, this unlucky group will be pushed into the 28% federal bracket.  That is an increase of 13%.  Most of the bracket increases will be 3% except for the highest (earners of $398,350 and up – they get a 4.6% increase) and the lowest (married earners of $17,900 or less get a 5% increase).

So, there you have it – a middle class, married filing jointly group gets slammed with Hurricane Bush Tax Cuts Expire.  Look out for updates on this storm as they come in!

If you are interested in looking at the various brackets (before and after), check out this story from Forbes by clicking here.