Time to Get Charitable is Now!
Despite all of the bad tax karma which is undoubtedly coming down the pike over the next couple of years, a small ray of sunshine does exist for 2010.
Recall in the Clinton era along came a “haircut” to the pool of itemized deductions claimed by the higher income folk among us – the so-called “3% rule,” whereby the total of one’s itemized deductions was clipped by 3% of the excess of one’s adjusted gross income above a certain level. Not a pleasant thing.
Along came Dubyah, of course, whose “Bush tax cuts” were enacted via the Economic Growth and Tax Relief Reconciliation Act of 2001, only to be gradually phased out by the end of this year. And unless something changes (Don’t hold your breath!), the 3% haircut (which has also been slowly vanishing over the last few years) will be back in 2011.
So you say you’re considering a big charitable donation? Better do it in 2010, while the full value of your charitable contribution deduction is still available. Let it go til 2011, and Obama will take his cut.
And speaking of which, get ready to start hearing more and more about new taxes as the country hurtles toward the brink. You heard Obama saying, last week, that “Everything has to be on the table,” as he set his newly appointed “debt commission” to the task of running interference for him and all of the other politicians who will inevitably say, “It’s not my fault” when the conclusion comes forth that new sources of revenue are mandatory.
And “everything on the table,” of course, is codespeak for the likelihood that a new kind of tax is on the horizon—the so-called “value added tax,” or national sales tax.
“We’re not going to say what’s in. I’m not going to say what’s out. I want this commission to be free to do its work,” quoth Obama, noting that the good old U.S. of A. will face a “day of reckoning” if the federal government cannot get spending under control.
And who’s been doing all of the spending of late?
Anyway, we hear that the commission’s chore is to produce a plan for a deficit no larger than $550 billion by 2015. And along the way comes White House Budget Director Peter Orszag, who was heard to say, “The options to further reduce the deficit may not be popular, but they are necessary.”
Translation – get ready for new taxes.
Take heart in the words of one of the commission chairmen, former Wyoming Senator Alan Simpson, who says that any notion of a value added tax (VAT) should not come on top of an income tax, but instead of one.
“To drag this specter of the value added tax like a dead rat through the room without doing something with the income tax is a fakery. What is this value added tax? I haven’t the slightest idea but if you’re going to mess around in that area or flat tax, you’re going to adjust the other tax in accordance.”
We like Simpson’s style.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He is also a contributor to the recently published 13th edition of Tax Savvy for Small Business, published by Nolo. He can be reached at 831-7288, and welcomes comments below.