The joint committee on deficit reduction appears to be stalled, with the deadline this month for them to have proposed sweeping changes to avoid automatic cuts in government spending. As of this writing, it is still up in the air whether the committee will actually produce any recommendations.
Regardless of the ineffectiveness of the committee, there is one important part of the tax code that was on the table for possible revision and you need to know about it. In exchange for the permanent reductions in the marginal tax rates set by congress, Republicans are now willing to consider the elimination of certain tax deductions. Among them is the tax deduction for charitable contributions.
While details have not been determined, two options under consideration include:
- setting a 28% cap on itemized deductions for high income earners
- setting a floor that would only allow a tax break for charitable contributions that exceed 2% of adjusted gross income
Any limits on the tax benefits of charitable contributions will likely reduce the amount of money giving to non-profits in subsequent years, reducing the funding those organizations receive to resource ministry.