© 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

Charitable GivingPotential January 1, 2013 Tax Law Changes

Considerations for an Uncertain Time.

With the potential January 1, 2013 tax law changes around the corner, is it better to make a substantial gift this year or wait until 2013?

There are two significant changes that will impact whether 2012 or 2013 charitable gifts result in a larger tax savings…

Scenario 1: The Tax Cuts Expire.

♦ The highest marginal rate will increase from 35% to 39.6% on January 1, 2013.

♦ And therefore, a charitable deduction made in 2013 could shelter income that is taxed at a higher rate – in effect making a 2013 gift more valuable.

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Scenario 2: Limitations Are Reinstated.

♦ For this purpose, a high-income taxpayer is identified at $166,800 and indexed for inflation in 2009.

♦ In this case, limitations on itemized deductions could be reinstated for high income taxpayers – including charitable deductions.

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The End Result.

♦ High-income taxpayers who may lose a significant percentage of the deduction may want to accelerate charitable gifts in 2012.

♦ Taxpayers whose AGI will not exceed the applicable threshold may want to wait until 2013 to shelter from higher rates.

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However…

Congress may act prior to the end of the year to extend the Bush tax cuts. In that case, the general rule of taking deductions sooner rather than later would apply.

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Additional Resources.

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♦ How will potential year-end changes impact my personal planning?

♦ What – if any – actions should be taken before the end of the year?

If you’re asking yourself these questions, see Edwards Wildman’s client advisory here.

© 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

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