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Important Information Regarding the Charitable Giving Deduction

10 January 2013 admin 1,282 views No Comment Email This Post Email This Post Print This Post Print This Post

By Lara Farhadi, Director of Advancement

The American Taxpayer Relief Act of 2012 includes the following provisions that may affect you.

In addition to preserving the charitable deduction, the new law also permanently extends the estate tax exempting the first $5 million of an estate and taxing the remainder at a 40 percent rate. Going forward, the $5 million exemption is indexed for inflation.

The IRA Charitable Rollover Distribution has been extended for one year through the end of December 2013 and is fully retroactive for 2012 for gifts of up to $100,000. What does this mean? Qualified charitable distributions made before February 1, 2013 may be counted retroactively for the 2012 tax year. A taxpayer who took a distribution from an IRA account in December 2012 may make a contribution to a qualified charity before February 1, 2013 and treat this as a direct transfer.

The marginal tax rate for individuals earning more than $400,000 ($450,000 for married couples) is 39.6 percent. Since the charitable deduction was not capped, an individual’s charitable deduction rate remains equal to their marginal rate. Individuals who are subject to the 30.6 percent tax bracket will have a 20 percent capital gain rate.

For additional information on the new legislation’s impact on charitable deductions, please contact your accountant. If you are interested in learning about the tax benefits of gift planning, please contact the Advancement Office.

 

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