Budget plan suggests limits on charitable tax deductions
February 20, 2012
President Barack Obama has proposed a new budget plan that would limit the number of itemized deductions allowed to households that earn more than $250,000 annually. In addition to charitable donations, the restriction would also affect medical expense and mortgage payment write-offs.
Individuals with incomes larger than $200,000 and couples that earn more than $250,000 would only be able to use 28 itemized deductions if the budget plan is approved. Over the course of 10 years, the plan to cap deductions would reduce the national deficit by $584 billion. If the measure is approved, nonprofit groups and foundations can use fund accounting
software to ensure they get the maximum number of deductions.
President Obama has made similar proposals in the past that were unsuccessful. Nonprofits and charities have been critics of the previous budget provisions, saying that imposing the limits could discourage charitable organizations from making contributions.
Additionally, the plan would require households that earn more than $1 million yearly to pay at least 30 percent of their income in taxes. The provision is named the "Buffett rule" after Warren Buffet who thought it was ridiculous that he fell into a lower tax bracket than his secretary. If the plan is passed, the new provision would replace an outdated alternative minimum tax law.