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New Tax Code Improvements for Charitable Giving

Posted on: August 22nd, 2014
charitable givingA bill that removes several tax barriers for charitable donors was passed by the House of Representatives in mid-July. A few tax incentives for donors expired last year and others were slated to expire in the near future, but the passing of the bill may make certain tax provisions permanent.

The America Gives More Act is a critical piece of legislation that encourages charitable giving. The Act includes five bills with unique provisions ranging from an extended donations calendar to penalty-free charitable donations made from retirement accounts. All measures noted below go into effect in the 2014 tax year pending further approval, unless otherwise noted:
  1. The Charitable Giving Extension Act. Donations made before April 15th qualify as deductions on the previous year’s tax return. This provision can help taxpayers make adjustments to their gifting strategies after the end of the tax year.
  2. The Permanent IRA Contribution Act. A permanent tax code provision for taxpayers aged 70½ or older would allow them to annually distribute up to $100,000 tax-free out of an Individual Retirement Account to charity.
  3. The Private Excise Tax Simplification Act. Private foundations’ investment income will now have a lower excise tax. The Act removed the 2% rate; now a flat rate of 1% will reduce administrative costs. Note: This measure would go into effect in 2015.
  4. The Fighting Hunger Incentive Act. Simplifies how farmers, restaurants, and grocery stores donate extra food.
  5. The Conservation Easement Incentive Act. Encourages farmers, ranchers and landowners to donate conservation easements that would save thousands of acres of farmland.

With respect to these areas, if the bill turns into law certain charitable gifts and related tax planning will be easier in the future. Instead of postponing gifting, waiting for extensions to pass, and adjusting charitable giving whenever a tax provision expires, American taxpayers can rely on permanent incentives. 

Understand the Senate still needs to pass the legislation as well. Follow our tax attorneys on Facebook and Twitter for updates on tax laws and planning trends.
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