Charitable Clarity at the Edge of the Fiscal Cliff

In the wee hours of January 1, 2013, Congress avoided the looming fiscal cliff by passing the American Taxpayer Relief Act of 2012 (ATRA). It is debatable how much “relief” ATRA actually provides, since the general effect of the bill is to create higher tax rates for upper-income taxpayers. But ATRA does offer clarity on a broad array of tax issues, including several provisions that are favorable towards charitable giving.

Perhaps the best part of ATRA is what was not included. In its search for “revenue” to feed its appetite for debt, Congress had considered such ominous proposals as capping charitable deductions and limiting the tax savings on charitable gifts. Fortunately, these proposals were not included, but even as I write, Congress continues to debate these and other measures to address much larger financial problems. For the time being, at least, we can be thankful that our nation still recognizes the importance of charitable giving and will continue to reward ICR donors for their gifts to our ministry.

Among ATRA’s most favorable provisions was the extension of the popular IRA Charitable Rollover through the end of 2013. IRA owners age 70½ or older can make gifts up to $100,000 to ICR without declaring it as income. Such IRA gifts also count toward required minimum withdrawals (RMD), providing a rare twofold opportunity to support ICR while avoiding taxes on income that might otherwise be required. IRA gifts are easy to make—simply contact your IRA administrator and give them our name, address, and federal identification number (95-3523177) along with the amount you would like to give.

The biggest news of ATRA was the creation of a new top tax bracket and a higher long-term capital gains rate on the sale of major assets. A whopping 39.6 percent is now required from all married persons making $450,000 or more in taxable income ($400,000 for single persons). For persons in this bracket, the long-term capital gains rate was increased to 20 percent, and combined with the additional 3.8 percent Medicare tax, the overall capital gains rate for upper-income persons will be 23.8 percent. Factoring in potential state tax rates, top earners could face a combined income tax rate between 40-48 percent and a combined capital gains rate for major sales between 28-33 percent! No matter how you look at it, individuals with higher incomes and those considering selling major assets are now facing higher taxes.

Thankfully, strategic charitable giving—through gift annuities, charitable remainder unitrusts and annuity trusts, or a well-planned will—can often minimize the tax bite no matter what your income level may be. ICR is well-equipped to issue and manage most gift annuities and charitable remainder trusts directly, and we can help in your will preparation by referring you to a knowledgeable attorney in your area. ICR’s Planned Giving website (click on the Planned Giving link at www.icr.org/donate) contains highly interactive modules and calculators to help you determine which vehicle might be best for you. Better yet, please contact me for personalized assistance at hmorrisiv@icr.org or call 214.615.8313.

ATRA contains many other provisions not covered here, but overall it was fairly kind to charitable giving. Donors with higher incomes and larger capital gains tax bills should find renewed incentive to engage in charitable planning, and ICR stands ready to help. We invite you to prayerfully consider how you can partner with us to ensure your resources support the Lord’s work. “Caesar” is entitled to that portion God has authorized for “him” to take—the rest belongs to God (Matthew 22:21).

* Mr. Morris is Director of Donor Relations at the Institute for Creation Research.

Cite this article: Morris IV, H. 2013. Charitable Clarity at the Edge of the Fiscal Cliff. Acts & Facts. 42 (3): 20.

The Latest
NEWS
A T. rex Swimming with Sharks?
The last time I checked, sharks didn’t swim on land. Most shark species inhabit saltwater oceans. Maybe tyrannosaurs swam some, but they didn’t...

NEWS
"Ancient" Fossil Still Has Hagfish Slime Residue
Hagfish look creepy. They can act creepy, too. Having no bones, they tie themselves into sliding figure eight knots that help them tear mouthfuls of...

CREATION PODCAST
What Do We Do With Darwin Day?
Many secularist and humanist organizations celebrate February 12 as Darwin Day, a day set aside to honor Charles Darwin and his legacy. But is Darwinism...

NEWS
Meteorite Impact Observed During Lunar Eclipse
On January 21, 2019, during a total lunar eclipse, astronomers and amateur stargazers alike saw a small meteorite strike the lunar surface.1 The collision...

NEWS
Revealing Our Fossil Wall
It was an exciting week here at ICR as we watched workers carefully mount nine fossil replicas to the Discovery Center’s exterior wall. Each 12ˈ×12ˈ...