Some experts are warning that the recent tax legislation signed into law by the President may lead many taxpayers who had postponed charitable giving to cut back on future donations as well.
The new tax law raises the exemption from federal estate tax to $5 million a person ($10 million per couple) for deaths in 2011 and 2012. As a result, fewer families will even come close to paying the tax. That means that, except for the super wealthy, the tax benefits of giving through an estate plan have been wiped out.
Previously, charities could point to the estate planning benefits of both lifetime gifts and charitable bequests. There’s an income tax deduction associated with gifts during life--adjusted gross income can be reduced up to 50% for cash gifts to public charities and by up to 30% for donations of appreciated assets, such as stock held longer than 12 months. But charities could also make another argument: If you’re not comfortable making a large gift now, remember your favorite cause or alma mater money in your will and you will be leaving less for Uncle Sam.
Of course that’s still a huge estate tax benefit for the nearly 60 U.S. billionaires who have now pledged to give away at least half their fortunes during life or at death. Facebook co-founders Mark Zuckerberg and Dustin Moskovitz are among those to have recently joined the philanthropic campaign led by Berkshire Hathaway ( BRK - news - people )'s Warren Buffett and Microsoft ( MSFT - news - people ) co-founder Bill Gates.
And certainly there are many others of lesser means committed to supporting charity regardless of the tax benefits. But without being too cynical or ignoring the power of altruism, studies do suggest that tax incentives are a positive influence on giving, and tough economic times are a negative one.
