Deductions Limits Will Affect Many : A greater disincentive for people to give
By JOHN D. MCKINNON
WASHINGTON—One of the biggest tax increases in the fiscal-cliff bill is also one of the least understood: a set of limits on tax deductions and other breaks that will hit far more households than the bill’s rate increases for top earners.
The bill that cleared Congress Tuesday boosts the tax rate for single filers making more than $400,000 and married couples filing jointly making more than $450,000, or roughly the top 1% of filers.
But provisions that reduce the value of personal exemptions as well as most itemized deductions, including those for mortgage interest and state income-tax payments, will affect about twice as many people since they carry a lower income threshold—$250,000 for singles and $300,000 for married couples.
Those new limits drew complaints from some groups that benefit from deductions, particularly charities that depend on tax-deductible donations. They worry that new curbs on deductions, coupled with other taxes on higher-income Americans, will put a damper on giving.
“We are concerned,” said Diana Aviv, president of Independent Sector, a coalition of foundations, nonprofits and other charitable groups. “The big question for us now is, if we are [also] increasing rates on folks…does the combination create a greater disincentive for people to give?”
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