2013 Tax Laws Create New Charitable Giving Opportunities
The American Taxpayer Relief Act of 2012 was enacted in on January 2, 2013. Following is an overview of the tax law changes and the ways in which they may impact you with regards to your potential tax liability and charitable deductions.
Direct IRA Charitable Rollover – Allows direct transfers of up to $100,000 from (non-Roth) IRA’s to charity with no tax liability. For ages 70 ½ and over. Satisfies Required Minimum Distribution rules. Must be a direct transfer.
- Extended for 2013
- Retroactive for 2012, with certain guidelines
- All Qualified Charitable Distributions (QCD) made in 2012 will qualify.
Income Tax Rates on High Income Earners
- For those making $400k+ (single) / $450k+ (married), there is a new tax bracket of 39.6%.
- With a higher income tax liability, the incentive for charitable donations is greater. In essence, deductible charitable donations now carry a lower net cost.
Long Term Capital Gains Tax
- Those with incomes over $200k (single) / $250k (married) will pay an extra 3.8% Medicare Tax, raising the LTCG tax to 18.8%
- Those with incomes over $400k (single) / $450k (married) will pay an extra 5% LTCG tax, plus the 3.8% Medicare Tax, raising their LTCG tax to 23.8%
- Capital Gains Taxes are still optional. With proper planning, this tax can be avoided. Examples include outright donation of appreciated assets, partial donation [Gift/Sale], and the use of Charitable Remainder Trusts.
- With a higher LTCG tax liability, the incentive for charitable donations is even greater. Donating appreciated assets now carries a lower net cost, with the combined Capital Gains Tax avoidance and deductions at Fair Market Value.
Estate Taxes
- The Estate Tax Exclusion has risen to $5.25 million, with a top rate of 40%. (Only those estates with assets in excess of $5.25 million will be subject to the estate tax.)
- Estate Taxes are still optional. With proper planning, this tax can be avoided. This can be done via Charitable Bequests, Charitable Lead Trusts, Family Limited Partnerships, Irrevocable Life Insurance Trusts, etc.
- With the changes to the tax laws, it has now become even more important to review and update your estate plan.
Itemized Charitable Deductions – Pease Limits
- Those with incomes over $250k (single) / $300k (married) will be subject to the Pease limits on charitable deductions.
- Any income in excess of these thresholds will reduce charitable deductions by 3% of the excess income (with a limit of an 80% reduction).
- Example: $350k (married) income = $50k excess earnings. $50k x 3% = $1,500. $30k charitable donations reduced by $1,500. They deduct $28,500 instead of $30,000.
- This is only a modest revision of a previous provision and will have relatively minor impact on high income earners.
- There have been NO CAPS placed on itemized deductions, nor was the proposal to limit deductions to 28% for high income earners enacted! This is significant!
Overall Evaluation – God’s hand of protection on the U.S. Tax Code and its charitable deduction provisions has been gracious. Some of the proposals that could have had significant negative impact on revenues for U.S. charities have been avoided, and only minor changes put in place. These changes increase tax liability for high income earners, but leave in place the provisions for minimizing or even avoiding certain taxes with proper planning. And they offer additional incentives for charitable giving. With all of the attention to the tax law changes, many more Ministry Partners, regardless of their income or net worth, will want to better understand their situation, as well as opportunities for planning. And the changes actually provide additional incentives for charitable donations and special charitable gift planning, rather than taking them away.
As Charitable Gift Planning Specialists, our role is to assist you in navigating the tax code and understanding your options. We offer Gift Planning and Estate Planning advice at no cost or obligation to you. With proper planning, taxes can be reduced and, in some cases, even eliminated. This includes income taxes, long term capital gains taxes, gift taxes, and estate taxes. This allows you to maximize your charitable investments while leaving more for yourself and your family.
Feel free to contact us for more information. You can also reach us by phone at (800) 449-5454, or by e-mail at info@gcfccc.org.
Press Release: The Great Commission Foundation Adopts DonorFirst™Technology
Orlando, FL. (May 1, 2012 ) – Crown Philanthropic Solutions, LLC, (www.donorfirst.org) an innovative provider of technology and services to the nonprofit, financial services and corporate communities, is pleased to announce that The Great Commission Foundation has recently adopted their DonorFirst™ platform to deliver an enhanced online environment and administrative support for their donor advised fund program. As a ministry of Campus Crusade for Christ, The Great Commission Foundation is one of a family of ministries including JESUS Film Project, Josh McDowell Ministry,Campus Ministry, FamilyLife, and Athletes in Action.
Bob Hawkes, Executive Director of The Great Commission Foundation said, “Our adoption of the Crown DonorFirst™ platform will provide our ministry partners with both improved access to financial and account information as well as an engaging and efficient way to manage their families charitable giving, receiving and sharing information about the various Campus Crusade ministries they care most about, and the ability to build charitable social networks that raise awareness of the organizations and programs they support.”
According to William Hewitt, Crown Philanthropic Solutions’ chief marketing officer, “Crown has introduced a significantly enhanced online environment which empowers donors with more immediate information on the impact and stewardship of their gifts and grants, and DonorFirst™ is the first platform in the market to deliver the expanded communication, engagement and reporting tools necessary to strengthen and extend multigenerational donor relationships.”
While donor-advised funds have traditionally been viewed as a flexible tool for ‘transactional’ giving, DonorFirst™ is the first technology platform in the market to blend the efficiencies of an online system with the expanded social and communication capabilities of the internet. This enables DonorFirst™ to finally deliver the type of grantee impact reporting and transparency lacking in previous systems.
“Since 1972 The Great Commission Foundation has been helping people fulfill their financial and ministry goals including over $1 billion in planned charitable gifts,” said Bob Hawkes, and our adoption of this new platform will enable us to deliver greater flexibility to our donors to follow and support the ministries they’re passionate about, including account access through Smart Phones and the ability to give ‘the gift of giving’ through the DonorFirst™ giving certificate capabilities.”
The Crown DonorFirst™ platform is the first solution in the Internet philanthropic space with the ability to support the levels of family collaboration, donor-grantee communication and investment flexibility that can truly help mobilize the vast amounts of social capital that exist within the nation today.
Donor-advised funds enable individuals with philanthropic interests to efficiently manage their charitable giving by allowing them to make an irrevocable contribution of personal assets at the most advantageous time; claim a tax deduction for the gifts; and then recommend a grant distribution from the foundation sponsoring their account to the charity or charities of their choice.
About Crown Philanthropic Solutions, LLC
Crown Philanthropic Solutions, LLC was established in 2005 for the primary purpose of creating a charitable technology solution that is responsive to the expanding needs of the philanthropic community. Crown recognized the increasing demands for improved transparency, better functionality, and greater informational flow within charitable management solutions. By leveraging advancements in Web technology Crown has created a bridge between the nonprofit and foundation community, financial organizations, and donors. The DonorFirst™ platform supports both a pooled investment chassis as well as individually managed accounts, and introduces levels of communication and collaboration within each donors’ account dashboard that have been unavailable in any existing DAF program. To learn more about Crown Philanthropic Solutions, LLC and their DonorFirst™ Program, please visit (www.donorfirst.org).
About The Great Commission Foundation
Campus Crusade for Christ (CCC) is the parent ministry of The Great Commission Foundation. CCC exists to fulfill the Great Commission through the power of the Holy Spirit by winning people to faith in Jesus Christ. They focus on creating spiritual movements that build up disciples and send them out to bring others to Christ. CCC’s vision is for everyone in the world to know someone who is truly living out new life in Jesus. Campus Crusade for Christ was founded in 1951 by Bill and Vonette Bright. This ministry, which began on the UCLA campus in Southern California, is now active in 191 countries.