While the “Fiscal Cliff” legislation recently passed by Congress averted the most extreme provisions regarding nonprofits – namely, a limit or “cap” on tax deductions for charitable giving – the experts at EHL Consulting caution nonprofit leaders to remain vigilant.The 112th Congress has essentially “kicked the can down the road.” In two months, the 113th Congress will still need to remedy many unresolved issues and renew the national debate on charitable deductions.
The Nonprofit Quarterly published an excellent article explaining the new provisions. Key points included:
- The new legislation raises the top tax rate to 39.6 percent on U.S. household incomes above $450,000.
- It also reduces itemized deductions by 3 percent of the amount that household income exceeds $300,000.
- The estate tax increases to 40 percent from 35 percent on a $5 million threshold.
- For a segment of the population, the payroll tax increases from 4.2 percent to 6.2 percent.
The professionals at EHL Consulting believe that the increased taxes on households could result in decreased “disposable” or “discretionary” income…leading to decreased charitable donations.
We recommend that nonprofits re-double their stewardship efforts for their major donors and really help these investors understand how their giving continues to make a difference.