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New Administration’s Proposed Tax Law Changes May Affect Charitable Giving

Before finalizing your year-end and future charitable giving plans, you may want to review the implications of these proposed tax law changes.

As a new administration in Washington, D.C., prepares to take office in 2017, you may be wondering how some of the proposed tax law revisions could affect your charitable giving. Although information regarding these potential tax law revisions is limited, USC’s gift-planning experts have compiled a brief summary of the tax proposals discussed during the presidential campaign and in the post-election period that could have an impact on charitable giving.

There’s no way to predict if or when these proposed tax law revisions will be adopted. However, keep in mind that making your donations this calendar year will allow you to take advantage of the current tax benefits for charitable giving.

If you’re not sure how you want to allocate your gift, you may want to consider a donor advised fund, charitable lead trust, charitable remainder trust or gift annuity. These gift-planning vehicles allow you to make a gift in 2016—locking in the current tax benefits—with the option to determine at a future date how you want your gift allocated.

USC’s gift-planning experts can help you review your charitable-giving options. To learn more, contact us at (213) 740-2682 or giftplanning@usc.edu. You can also visit us online at www.usc.edu/giftplanning.

Summary of Changes

Income Taxes

The new administration wants to simplify the tax code and reduce the highest marginal income tax rate from 39.6 to 33 percent, as well as reduce the number of tax brackets and the overall tax rates in those brackets. This change will provide fewer tax benefits for donations, because tax savings from charitable gifts are a function of the tax rate in an individual’s tax bracket.

Itemized Tax Deductions

The new administration’s tax plan would cap itemized tax deductions at $200,000 for married couples filing jointly and $100,000 for unmarried individuals. For some donors, this cap would significantly reduce the tax benefits of charitable giving.

Capital Gains Taxes

The proposed tax plan would keep the capital gains tax rate at its current 20 percent, but it would eliminate both the 3.8 percent Medicare tax on net investment income as well as the alternative minimum tax (AMT). This, too, would mean fewer tax benefits for individuals making charitable gifts.

Repeal of Estate Tax

The federal estate tax may be repealed, thus providing no tax benefits for charitable gifts from large estates. However, a capital gains tax would be imposed at death on assets exceeding $10 million (with exceptions for small businesses and family farms). This capital gains tax may counter the tax effects of repealing the federal estate tax by encouraging larger gifts at that higher asset level.

Corporate Income Taxes

The corporate income tax rate may be reduced from 35 to 15 percent. This would provide substantially fewer tax benefits for charitable gifts from corporations.

This article is not intended as legal, accounting or other professional advice. USC encourages its donors to engage the services of an appropriate professional advisor when planning a charitable gift with tax and/or other financial implications.


The material presented on this Planned Giving website is not offered as legal or tax advice.
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