Giving USA Report Brings Good News for Gift Planners

2014 was a record year for philanthropy in the United States, according to the Giving USA 2015 Annual Report. There was a 7.1% increase in giving dollars over 2013 (5.4% adjusted for inflation). These numbers signal the return of pre-recession giving patterns. Some experts had predicted it would take 10 years for charitable giving to rise back to pre-recession levels, so the increases are heartening.

BDQ #4: Why Is There a Charitable Deduction and How Does It Work?

The income tax charitable deduction has been around since 1917, just four years after the 16th Amendment created the modern Federal Income Tax. But why are charitable contributions deductible? And, can a donor actually save money by making a charitable contribution? First, let’s review the history of the income tax, then we’ll explore how the charitable deduction works in practice. The Federal Income Tax The Constitution limited the ability of Congress to impose taxes by requiring that “direct taxes” be levied in proportion to each State’s population. Direct taxes are those, such as the income tax, that apply directly to persons or property. However, there was no limitation on indirect taxes, those that apply to an event including duties and tariffs. As a result, during our nation’s first century, tariffs were the largest source of Federal revenue.

Breaking News - Legacy IRA Act Becomes Law

[Updated December 29, 2022] In the final hours of the 117th Congress, provisions of the Legacy IRA Act included in an omnibus spending bill (the Consolidated Appropriations Act, 2023 or H.R. 2617) passed the House and Senate and were signed into law by President Biden, creating a new charitable gift planning opportunity. Beginning in 2023, donors over age 70 ½ will be able to make a Qualified Charitable Distribution (QCD) in exchange for a charitable gift annuity (CGA) or to fund a charitable remainder annuity trust or charitable remainder unitrust. For practical purposes, it is unlikely donors will use this opportunity to fund a charitable remainder trust. However, a charitable gift annuity could be an appealing and viable option for some donors.

IRS Announces Indexed Tax Items for 2022

The IRS has announced the values for 2022 of various tax items that are indexed annually for inflation. In general, values have been adjusted upward about 3.0%. Of particular interest to gift planners, the unified gift and estate tax exemption amount will be $12,060,000 ($24,120,000 per couple) in 2022, an increase from $11,700,000 ($23,400,000 per couple). For the first time since 2018, the annual gift tax exclusion will also increase, from $15,000 per person this year to $16,000 per person next year. Also of interest, the standard deduction in 2022 will increase to $25,900 for married couples filing jointly and to $12,950 for single filers, an increase of $800 and $400, respectively. Taxpayers who are 65 or older will qualify for an additional $1,400 in standard deduction on top of that (an additional $1,750 if single and not a surviving spouse). See Revenue Procedure 2021-45 (https://www.irs.gov/pub/irs-drop/rp-20-45.pdf) for complete details, including all federal income tax...