Legislation passed by Congress on Tuesday that avoids the fiscal cliff includes a number of provisions that impact nonprofits and nearly all taxpayers.
The charitable deduction continues to be coupled with an individual’s or household’s corresponding tax rate. For example, the deduction value of a charitable donation for someone in the 28 percent bracket is 28 percent.
The highest marginal tax rate rises to 39.6 percent for individuals making more than $400,000 a year and households making more than $450,000.
For individuals earning more than $250,000 and households earning more than $300,000, the value of itemized deductions is reduced by 3 percent.
The tax on capital gains increases to 20 percent for amounts greater than $400,000.
The estate tax exemption remains at $5 million per individual with the tax on amounts greater than the exemption increasing to 40 percent.
The popular IRA Charitable Rollover has been extended for two years, retroactive to 2012, through 2013. Individuals 701 2/ or older may direct up to $100,000 directly from their IRAs to qualified charities to help satisfy the required minimum distribution. Charitable rollovers can be made this month for 2012; individuals who took mandatory distributions last month can donate that money to a qualified charity and not have the distribution subject to tax.
The temporary suspension of a portion of the payroll tax was not extended. Payroll taxes will rise 2 percent for all wage earners. This “holiday” was created two years ago to help stimulate the economy.
Barry VanderKelen is executive director of the San Luis Obispo County Community Foundation. Reach him at firstname.lastname@example.org.