New tax law provides alumnae unique giving opportunity
The American Taxpayer Relief Act of 2012 (ATRA) gives taxpayers some certainty for at least another year, and in some cases, permanently. It also provides Sweet Briar alumnae a unique opportunity to make tax-savvy gifts to their alma mater!
Here are some highlights of the changes in effect for 2013:
The charitable deduction is preserved.
The charitable deduction is preserved; however, The White House and Congress may consider capping the deduction in future negotiations.
The IRA charitable rollover returns for 2012 and 2013.
Donors age 70½ or older are once again eligible to transfer up to $100,000 from their IRAs directly to qualified charities without having to pay income taxes on the money. Congress recognized the issues with a late extension and provided two special transition rules:
1) Qualified distributions made by Feb. 1, 2013, may be counted retroactively for the 2012 tax year.
2) A taxpayer who took a distribution from an IRA in December 2012 may make a contribution to a qualified charity before Feb. 1, 2013, and treat this as a direct transfer.
Estate, gift and generation-skipping tax exemptions are retained.
The new law permanently preserves the current individual gift, estate and generation-skipping tax with a $5 million exemption level. This exemption will be indexed for inflation in future years. Estate taxes rise to 40 percent from the current 35 percent. The new law also allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse. This portability provision is also made permanent.
Individual income tax rates increase for “high-income households.”
The new law permanently extends tax rates set by the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 for taxpayers earning less than $400,000 per year and married couples earning less than $450,000. A new 39.6-percent bracket applies for married persons with $450,000 of taxable income, heads of household with $425,000 of taxable income, and single persons with $400,000 of taxable income. The 2013 tax rates will extend the 10-, 15-, 28-, 33- and 35-percent brackets.
Capital gains tax rates increase for high-income households.
The capital gains and dividend tax rates for high-income households taxed at the new 39.6-percent rate will increase to 20 percent. In addition, because capital gains for those married with incomes over $250,000 and for those single with incomes over $200,000 will be subject to the 3.8-percent Medicare tax, the capital gains rate for upper-income persons will be 23.8 percent. The capital gains and dividend tax rates will remain at 15 percent for taxpayers whose income falls between the 25-percent tax bracket and the new 39.6-percent rate and at 0 percent for those in the 10- and 15-percent income brackets.
Itemized deductions and personal exemptions are restricted.
The new law caps itemized deductions and phases out the personal exemption for individuals earning $250,000 or more and for married couples earning $300,000 or more.
The payroll tax cut ends.
The new law does not extend the 2-percent Social Security tax cut that has been in place for two years.
Sweet Briar alumnae with higher income taxes and larger capital gains tax bills may find new reasons to engage in charitable giving and effective estate planning that benefits Sweet Briar College.
Please contact Margie Lippard, director of major and planned giving, at [email protected] or (434) 381-6538 to review your estate plan today!