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Chipping Away at the Nonprofit Tax Deduction

Part of the Fiscal Cliff deal struck by President Obama with Congress was more taxes to be paid by those earning over $300,000 a year. The way this compromise was arrived at has caused some concern among nonprofit leaders. Especially those leaders of larger nonprofits: Universities, hospitals, museums and other arts institutions with relatively large budgets (at least $5 million a year) that have significant development staff and attract substantial annual gifts from wealthy individuals.

In a recent article in Forbes Magazine http://onforb.es/11H3aLF the author explains how the change will work. Persons earning over $300,000 will have to choose how they will take their deductions, because they will be limited. For each $100,000 earned over the first $300,000, 3% (or $3,000) is removed from the deduction and essentially becomes part of the tax cost. For those earning millions, that can be a substantial amount. And the potential impact on charitable giving…the disincentive to donate because of the tax implications…can be significant. Small-to-midsize nonprofit organizations will likely not feel much of a squeeze as a result of this change in tax policy. But the big nonprofits will likely feel the pain in 2013.

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