By Melvin Adams
Are you looking for a parachute for the likely fall off the “fiscal cliff?”
Since the recent election there has been a scramble of politicians, accountants, philanthropists, non-profits, and anyone who uses charitable giving to limit their tax liability. In some respects, the talk of the nation is the pending “fiscal cliff.” Many are looking for a parachute to help them survive the impending fall.
Why? In part, because the tax deduction for charitable giving, a tax code fixture since the early 20th Century, is being considered as part of the broad fiscal cuts being negotiated in Washington.
Obviously actions taken by our government will impact us all. But how?
I think my friend, David Barrett, CEO of Barrett Capitol Management LLC, answered that question best in our recent correspondence on this matter. “The only thing that is certain about the “fiscal cliff” negotiations is that the outcome is VERY uncertain. NO ONE knows what’s going to take place.”
Frankly, many individuals don’t feel that the Congress will eliminate the charitable donation tax credit. Blessing those who give is almost as strong an American tradition as apple pie. But that said, under this Administration, great American traditions are being done away with at a rate and scale never seen before. David Barrett is right. “NO ONE knows what’s going to take place.”
Let me be clear!
I don’t intend to add to conversations on the “fiscal cliff” that strike sheer terror to the soul.
I am confident that God is in control of everything, including the US government, you, and me. I believe that everything belongs to him and we are only blessed stewards of what He allows us to have.
The question turns to whether or not we want to give intentionally to things we believe in or if we are going to wait and see if the government changes the law and limits our giving possibilities, perhaps even taking that money from us for its own use.
This is where I encourage good counsel, sound wisdom, and Christian stewardship.
Harold Schmul, a friend now deceased, used to say, “Do your giving while you’re living so you’re knowing where it’s going.” His words are always good wisdom, but ring especially true as we approach the “fiscal cliff” before us.
So, what do we know?
“There is no reduction on the amount of the itemized deductions you can take for 2012 charitable contributions up to your Adjusted Gross Income (AGI) limit (50% for cash donations; 30% for securities – assuming the charitable contributions are made to public charities). However, unless Congress takes some action, the phase-out will come back beginning on January 1, 2013.” – Fidelity Charitable
There is a lot of discussion around capital gains tax rates going up. The discussion is that it would go from 15% to 23.8% for the wealthy (20% for the top rate, but add another 3.8% for the additional tax on capital gains for Obamacare. That would be a hefty 58.7% increase in capital gains tax rate for the top bracket). This potential increase is why right after the election you saw people sell off some of their stocks that had large capital gains, bringing the market down. People are still considering selling to pay capital gains this year instead of next. It’s a reason people would give their highly appreciated stock to charities rather than pay taxes on the gains. The combination of a cap on deductions and a higher rate next year could move people to gifting more this year.
As the New Year Approaches
Prayerfully take the actions you feel are right as a Christian steward. We would be grateful if you would invest in RENEWANATION before the year end, or frankly any time.
RENEWANATION is a 501(c)3 non-profit public charity committed to the vision of offering every child a Christian worldview. We believe that the battle of worldviews is taking place in K-12 classrooms across America as young minds are greatly influenced by the instruction they receive in the classroom. We work with families, churches and schools to promote instruction that leads to a Christian worldview.
Please contact us at email@example.com if you would like to discuss your giving plans and options.