Charitable incentives appear to be protected in "Buffet Rule," but budget also calls for 28 percent cap on charitable deductions
The President released his proposed FY2013 budget on February 13, 2012, which unfortunately sends mixed signals regarding the Administration's support of tax incentives for charitable giving.
The budget includes language protecting charitable giving incentives in a section regarding the "Buffet Rule," which is proposed as a replacement for the Alternative Minimum Tax.
However, the budget also includes the Administration's now-familiar proposal to cap deductions, including the deduction for charitable giving, at 28 percent for families with incomes greater than $250,000 or individuals with incomes over $200,000.
Download the Administration's proposed FY2013 Budget.
Language from the Administration's Proposed FY2013 budget:
Observe the Buffett Rule. No household making over $1 million annually should pay a smaller share of its income in taxes than middle-class families pay. As Warren Buffett has pointed out, his effective tax rate is lower than his secretary’s. And, the President is now specifically proposing that in observance of the Buffett rule, those making over $1 million should pay no less than 30 percent of their income in taxes. The Administration will work to ensure that this rule is implemented in a way that is equitable, including not disadvantaging individuals who make large charitable contributions. And he is proposing that the Buffett rule should replace the Alternative Minimum Tax, which now burdens middle-class Americans rather than stopping the richest Americans from paying too little as was originally intended.
Reduce the Value of Itemized Deductions and Other Tax Preferences to 28 Percent for Families With Incomes Over $250,000. Currently, a millionaire who contributes to charity or deducts a dollar of mortgage interest, enjoys a deduction that is more than twice as generous as that for a middle-class family. The proposal would limit the tax rate at which high-income taxpayers can reduce their tax liability to a maximum of 28 percent, affecting only married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000. This limit would apply to: all itemized deductions; foreign excluded income; tax-exempt interest; employer sponsored health insurance; retirement contributions; and selected above-the-line deductions. The proposed limitation would return the deduction rate to the level it was at the end of the Reagan Administration. It would reduce the deficit by $584 billion over 10 years.