President Obama's proposed budget seeks to increase taxes on charitable gifts by the wealthy.(The good news is that it won't affect Al Gore's taxes one bit...)
In a document given the rather balsy title, “A New Era of Responsibility – Renewing America’s Promise," the Obama administration has announced plans to cap the tax rate that families with incomes over $250,000 can claim for itemized deductions at 28 percent.
Accordingly, high-income donors who are subject to the 33 or 35 percent income tax bracket and who, under current law, would be able to claim itemized deductions at this rate will, under the new proposal, have to in effect subject between a 5 and 7 percent of their charitable donations to income tax.
Example: A couple in the 35 percent bracket gives $100,000 to charity. Under current law, they will reduce their income taxes by $35,000. The net cost of their gift will be $65,000. Under President Hope's plan, the couple will only be able to deduct their gift at the 28 percent rate, thereby reducing their taxes by $28,000. In essence, they will pay an additional $7,000 in tax for the privilege of making their gift thereby increasing the after-tax cost of their gift to $72,000—a 10.8 percent increase over current law.
The Planned Giving Design Center discusses the Obama proposal in more detail here.
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