It is never too early in the year to talk to your clients about making donations to charity. In fact, the tax benefits may never be better than those available in 2012.
Under pressure to solve the federal budget deficit, leaders on Capitol Hill are eyeing a range of tax reform proposals. In addition, many of the laws that created the current, historically low tax rates are set to expire at the end of the year. Unless the Bush-era tax cuts are extended, income phaseouts on itemized deductions will return in 2013. As a result, the new year will usher in a tax landscape where many itemized deductions could be eliminated or reduced.
Lawmakers have already been scrutinizing the deduction for charitable giving, especially for high-net-worth donors. And President Obama has included limits on itemized deductions for high earners in his budget proposal.
Among the provisions: Limits on itemized deductions would be reduced to a maximum of 28% for families with income over $250,000 or single taxpayers earning more than $200,000.
Additionally, it’s reasonable that the estate tax could be more onerous in the future as the federal government looks to generate more tax revenue, so removing assets from estates now may have advantages.
Accelerating charitable contributions may also be a useful strategy for clients wishing to benefit from the existing tax rates.
Discussing the changing tax environment around charitable giving is a good opportunity to reach out to high-net-worth clients. You may also want to consider collaborating with a local charity to hold a joint event that could bring together high-net-worth donors to provide more information about the charity and the current tax landscape. At this event, you can also make the case for charitable contributions, and give donors an opportunity to connect with a financial advisor.
More in: Retirement/Income, Taxes