There is much confusion about the impact of the “phase-out” of itemized deductions for high income tax payers. As we noted in last week’s post, under the new federal tax law individuals making over $400,000 ($450,000 for married couples filing jointly) will be in the top tax tier and will be subject to the 39.6% income tax rate (up from 35%). Also, itemized deductions for charitable giving, will be reduced for individuals with adjusted gross incomes exceeding $300,000 for joint filers and $250,000 for single filers. However, despite this reduction is personal exemptions under the new law, those in the top tax tier may actually benefit with regard to charitable deductions.
How can this be? In 1991, Congress enacted a law that included provisions which, in effect, reduced tax benefits associated with itemized charitable deductions for those in the top tax tier. However, under the provisions of the new federal tax law, it appears that those in the top tax tier may, in effect, receive more tax benefits for itemized charitable deductions than they received in the past. In fact, the tax benefits for charitable giving may be the highest benefits seen by this group in the last 15 years or more!
In order to understand how the new law impacts deductions for charitable giving, it’s highly advisable that you consult with a tax expert.
Getting Legal Help
Experienced Estate Planning and Tax attorney, Elga Goodman, can help you understand the new federal tax law and how it applies to you. She can work with you to evaluate your options and create an estate plan that best reflects your wishes and the needs of your family. Contact us today at 973-841-5111.
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