Charitable Donations

In past posts I had been concerned over the proposed changes in charitable donations and the tax law.  President Obama had looked to reduce the income deduction for donations to charitable organizations for those earning over $250,000.00.  Charitable organizations fought the proposal at it all but appeared dead. I, of course was concerned that many smaller historical societies and local museums would suffer disproportionately if the proposal became law. I understand the truly wealthy, such as Bill Gates and Warren Buffett will continue to give, but I am not sure of the consequences on those earning just over the $250,000.00 level.

Living in the Washington DC area for more years than I care to remember has made me keenly aware that many concepts and proposals, both good and bad have a tendency to resurface.

The Los Angeles Times is reporting the reduced deduction is back on the table in order to raise revenue.

If President Obama has his way, the Chronicle of Philanthropy reported Monday, tax deductions for charitable donations will be capped at 28% starting in 2011 for individuals earning more than $200,000 and joint-filers whose income tops $250,000. The current tax write-off for people in the top bracket is 35%.

So an arts philanthropist donating a $1-million gift to a museum or performance group would get a $350,000 tax break this year, but only $280,000 in 2011.

Besides potentially lessening the tax incentive for the wealthy to give, the president's tax proposal would end tax cuts for wealthy Americans, restoring the top tax bracket to 39.5%, where it stood before 2001 cuts, slated to last 10 years, reduced the top bracket to 35%. That means the wealthiest donors would have a bit less disposable income to contribute to their favorite charities, arts or otherwise. If the very rich decide to put dollars that they otherwise might have given away into a rainy-day fund to pay the taxman, arts groups and other nonprofits could suffer.

Arts groups probably won't be able to look to the National Endowment for the Arts to plug any funding leaks that might result: The president's budget proposal calls for the endowment to get $161.3 million for fiscal 2011, a 3.7% cut from the current $167.5 million.

To read the full LA Times article, click HERE.