Fiscal Cliff Driving a Wave of Charitable Giving

Tuesday, 18 Dec 2012 07:55 AM

By John Morgan

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Americans are ramping up charitable donations now at year-end to catch tax deductions they fear will disappear in 2013, according to Investors Business Daily (IBD).

The phenomenon is being driven by the fiscal cliff tax and spending negotiations between Republicans and President Barack Obama.

The current rate on gifts and estates is 35 percent. If lawmakers don't strike a deal before year-end and the automatic tax increases kick in, that rate rises to 55 percent.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Furthermore, bequests of more than $1 million will become taxable, which is a major change when compared with the current lifetime exemption limit of up to $5.12 million per person.

“There’s been a noticeable increase in charitable giving,” said Scott Michalek, a principal at Westcott Financial Advisory Group in Philadelphia.

“Clients fear either (Congress or the White House) may eliminate the deductibility of charitable gifts or reduce the deduction.”

Michalek said his clients have accelerated charitable donations by about 25 percent. “But that means we’ll likely see a decrease in charitable giving next year. That’s especially true if new rules cap the deductibility of charitable gifts.”

Amy Danforth, senior vice president at Fidelity Charitable, told IBD donations into her group’s accounts this year through September 30 were up 63 percent over the same period in 2011.

She said she had no data to prove the increase is due exclusively to fiscal cliff anxieties, and that other factors could include improvements in the economy and investor confidence.

Reto Gallati, Chief Investment Officer at Chicago’s Raetia Investments, said financial have advisers told him their clients have advanced into 2012 some charitable deductions they normally would have made in 2013.

“CPAs and planners I talk with are inundated with requests to shift giving unto 2012,” he said.

And opinion column in The New York Times agreed on at least one aspect of the impending fiscal cliff — elimination of charitable donations should not be on the table in Washington.

“Whatever else we do about the tax code, we need to save the charitable deduction, which has done so much good in our country and springs directly from some of our deepest values,” Yale economist Robert Shiller wrote in The New York Times.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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