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Twenty-First
Securities Corporation

780 Third Avenue
New York, NY 10017
212.418.6000
info@twenty-first.com


 After-Tax Cost of Charitable Contributions

January 7, 2013


There’s been much noise over whether the “new” tax regime will retard taxpayer’s charitable largess. Our analysis concludes that for those in high tax states, the after tax cost of a charitable donation has NOT gone up and may have actually decreased.

The American Taxpayer Relief Act of 2012 reinstated the Pease limitation on deductions. There were no other limits placed on deductions in this recent tax legislation although the concept had been roundly embraced in the Presidential campaigns.

Taxpayers that live in low tax states and claiming few deductions (besides their charitable giving) could see their after tax cost of giving rise dramatically.

Since this is so taxpayer specific we offer an interactive Excel spreadsheet to help you see how the reinstatement of the Pease limits will affect the cost of your charitable gifts.

Below is a table with a few scenarios illustrated as well as a link to the spreadsheet.

 Click here for our calulator: After-tax cost of charitable contribution

  Click here for the Wall Street Journal article - How Much Will Your Taxes Jump?

 

Marginal Tax Rate

39.60%

Adjusted Gross Income

$1,000,000

$5,000,000

$5,000,000

Applicable Amount

$300,000

$300,000

$300,000

Excess

$700,000

$4,700,000

$4,700,000

Disallowance Rate

3% of AGI or 80% of deductions - whichever is less

Disallowance

$21,000

$141,000

$141,000

$80,000

$480,000

$80,000

State Income tax and other itemized deductions

0

$500,000

0

Charitable gift

$100,000

$100,000

$100,000

Deduction after disallowance

$79,000

$100,000

$20,000

Tax Savings of Charitable Gift

$31,284

$39,600

$7,920

Net Cost of Contribution

$68,716

$60,400

$92,080

 

 



 



     

 

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