Giving in 2013 — The American Taxpayer Relief Act of 2012

On Thursday, January 3, 2013, President Obama signed the American Taxpayer Relief Act of 2012 (the "Act"). There are a several provisions within the Act which may influence charitable giving strategies for 2013.

These include:

  • An increase in the ordinary income tax rate for taxable income above $400,000 for individuals and $450,000 for couples,
  • A permanent increase in the top estate tax rate,
  • And an increase in the top tax rate on capital gains and dividends for high earners.

In addition, an overall limitation in itemized deductions (known as the Pease limitation) has been reinstated for those taxpayers with adjusted gross income above $250,000 (individuals) and $300,000 (couples).

Notably for donors giving to charity, the IRA Charitable Rollover provision has been extended retroactively for 2012 and also into 2013, allowing those over age 70½ to make tax-free distributions of up to $100,000 from their IRAs directly to qualified charities. It is important to note that donor-advised funds, private foundations, and supporting organizations do not qualify to receive tax-free distributions from IRAs.

Taking a strategic approach to charitable planning is as important as ever as donors determine the actions that will help them give more to the charities they support.

With decisions on entitlements, the debt ceiling and overall governmental spending still looming, future reform may be necessary. Both Republicans and Democrats have indicated that additional work is needed to address tax and spending issues, and we anticipate this debate will continue for some time.

As always, Fidelity Charitable is monitoring the situation closely and will keep our donors updated as changes occur that may influence charitable giving.