Many nonprofits voiced their concerns that the Fiscal Cliff deal would have a negative impact on charitable deductions. They worried that capping the tax deductions for charitable contributions from the wealthiest families and individuals would hamper their fundraising efforts. However, the Fiscal Cliff deal did not limit tax breaks on charitable deductions and may in fact have a positive effect on donations this year, according to a brief on The American Taxpayer Relief Act of 2012 from the Urban-Brookings Tax Policy Center’s Urban Institute on Nonprofits and Philanthropy.
The document answers the question that has since been abuzz in the nonprofit community, “What Does The Fiscal Cliff Deal Mean for Nonprofits?” It explains that a number of provisions in the Act could potentially have an impact on charitable organizations, such as an increase of the top tax rate from 25 to 39.6 percent on taxable income, while itemized charitable deductions can still be subtracted at their full rate. Individuals who donate appreciated property may also find there are additional tax benefits, thanks to capital gains increases for corporate stock, real estate and investments.
In all, these changes could pump approximately $3.3 billion more into nonprofits’ accounts, representing a 1.3 percent jump over giving totals in 2012, the report revealed.