Charitable Deduction Limitation Scare

A shock went through the nonprofit community last week when it was mistakenly believed that President Obama was moving to restrict incentives for charitable giving (which would not be surprising given President Obama’s track record). And although it now appears that this is not the case, leaders in the nonprofit sector are still concerned.

The White House’s 2013 budget plan calls for limiting itemized deductions to 28% for married couples with income over $250,000 and for individuals with income over $200,000. As it was not immediately clarified, leaders in the nonprofit sector believed the limitation on itemized deductions included charitable donations.

But at the end of last week, a blog from the White House explained that the limit on itemized deductions would not include those for charitable donations. As such, the charitable deduction would be the only itemized deduction exempt from this reform.

However, charity leaders still worry that the so-called Buffet Rule (which we discussed here) and itemized deduction cap will stifle charitable giving. One of the loudest voices of concern has been from Independent Sector. Leaders of the organization argue that the limitation will reduce giving and negatively impact the ability of charities to fulfill their missions. But the White House counters that the limitation will reduce the deficit by $584 billion over 10 years.

We will likely hear more on the proposed budget and readers of this blog will be kept apprised. In the meantime, you can join Independent Sector, along with a “panel of nonprofit policy practitioners,” as they discuss the proposed budget on February 24.