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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?
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Marginal Tax Rate
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39.60%
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Adjusted Gross Income
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$1,000,000
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$5,000,000
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$5,000,000
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Applicable Amount
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$300,000
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$300,000
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$300,000
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Excess
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$700,000
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$4,700,000
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$4,700,000
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Disallowance Rate
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3% of AGI or 80% of deductions - whichever is less
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Disallowance
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$21,000
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$141,000
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$141,000
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$80,000
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$480,000
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$80,000
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State Income tax and other itemized deductions
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0
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$500,000
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0
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Charitable gift
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$100,000
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$100,000
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$100,000
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Deduction after disallowance
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$79,000
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$100,000
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$20,000
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Tax Savings of Charitable Gift
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$31,284
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$39,600
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$7,920
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Net Cost of Contribution
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$68,716
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$60,400
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$92,080
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