In light of the current situation, we are offering our clients the opportunity to meet with us virtually, rather than in-person. Please click here to contact us or call 800-756-5596 to schedule your appointment
Our phone lines are currently down, please use 323-391-4162 as an alternative number. Thank you.

Make Informed Decisions
About Your & Your Loved Ones' Futures
Based On Experienced Advice


Fiscal Cliff Falls on the Charitable “Rich”

| Jan 28, 2013 | Fiscal Cliff, Fiscal Cliff |


There is much confusion and misinformation about the impact of the “fiscal cliff” tax law on charitable giving. Witness this tweet from Ari Fleischer, former press secretary for President George W. Bush, quoted in an article he wrote that was published in The Wall Street Journal on Friday, January 4:

“I increased donations to charities in 2012. This deal limits my deductions so I, & many others, will likely donate less in 2013.”

It’s quite fortunate that there were relatively few casualties in the fiscal cliff deal. In fact, some areas of the tax law became better, or at least safer, because the laws are now more predictable.

Nonetheless, there were certain casualties and, according to a great many writers, charitable giving and donors themselves were cut a raw deal.

The fiscal cliff deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks.” Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those “stealth taxes” working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners.

For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year.

Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have an increase in your AGI.

So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days.

For more information, please visit my estate planning website.