Thursday, December 13, 2012

Charitable Donation Deduction on the Chopping Block?

There is a television show on Bravo Channel called "Chopped," where four chefs compete each week for a $10,000 prize in a three-round food preparation contest. Three judges taste their hors d'oeuvres, their entrees and their desserts, and at the end of each round one contestant is "chopped," meaning eliminated, until one chef is left as that week's Chopped Champion. 

Currently, there are chop-talks going on in Washington. These come amidst the battle over the fiscal cliff and balancing the federal budget and closing the deficit. There have arisen a number of tax deductions that are being proffered for chop-status from the Internal Revenue Code. At least they are being looked as to be scaled back dramatically if not entirely chopped. One of these proposed cuts is of grave import to non-profit charities that rely on donations for their existence; it is the charitable donation deduction.

Today's issue of The Washington Post features a piece on the Obama Administration's push to get non-profits to support his plan to either eliminate or cut back on the amount of a charitable donation that individual and corporate donors can deduct from their income to help reduce their tax liability. It is not a new proposal, but the conversation has been rising in intensity recently as the necessity for the federal government to cut spending has grown. With opposition to raising tax rates also at a fever pitch, Democrats are looking for ways to increase revenue without raising rates. One of the few tools at their disposal is to cut back on the deductions from income that a person can take. The home mortgage interest deduction shares the chopping block with the charitable donation deduction.

Will the cleaver fall? Will the charitable donation deduction survive to be a Chopped Champion? We will know before the end of the year. Or maybe not.

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