January 4, 2013
Adoption and Charity Tax Breaks Survive 'Fiscal Cliff' Fix
But ECFA says new limits 'ultimately discourage greater levels of giving.'
The American Taxpayer Relief Act was signed into law by President Barack Obama on Thursday, averting the government's "fiscal cliff" and preserving two items of interest to evangelicals—a tax deduction for charitable giving and a tax credit for adoption.
Baptist Press reports how the bill preserved and extended a tax credit to adoptive families that was set to expire at the end of the year, though overall nonprofits have mixed feelings about the bill.
But Americans in the highest tax brackets will face new limitations, possibly lessening their charitable giving as certain tax deductions will be phased out beginning in 2013.
The Evangelical Council on Financial Accountability (ECFA) says these limits "ultimately discourage greater levels of giving to charitable organizations." According to ECFA:
Although none of the major proposed restrictions were placed on the charitable deduction, the “Pease” limitations—phasing out deductions for charitable giving, mortgage interest, and state and local taxes for high-bracket taxpayers—were reinstated and made permanent beginning 2013 to the disappointment of many in the charitable sector. Total itemized deductions for taxpayers will now be reduced by 3 percent of the amount by which adjusted gross income (AGI) exceeds a set threshold, up to a maximum of 80 percent of otherwise allowable itemized deductions.The new thresholds instituted by the bill are $250,000 for individuals and $300,000 for joint filers.
The itemized deductions impacted by this include charitable deductions to non-profits, including churches and other religious organizations, Religion Clause reports.