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The American Taxpayer Relief Act of 2012

The American Taxpayer Relief Act of 2012 (ATRA)  contains provisions addressing gifts to charity from IRA assets, individual income tax rates, capital gains tax rates, deduction phase-outs, and estate, gift and generation-skipping transfer taxes.

Gifts from IRAs

Section 208 of the bill signed into law provides for tax-free distributions up to a total of $100,000 from IRAs to charities in 2013, and makes the provision retroactive to January 1, 2012. Donors that took required minimum distributions in December 2012 can contribute all or a portion of that distribution to charity by the end of January 2013 and have it treated as a qualified charitable distribution (QCDs) for 2012. Donors can make QCDs in January 2013 and have them count as 2012 distributions.

Individual income tax rates

Individual income tax rates increase to 39.6% for taxable income over $400,000 for single tax-payers and over $450,000 for married individuals filing jointly. Income tax rates for other income tax brackets remain unchanged.

Tax rates on capital gains and qualified dividends

The tax rate on capital gains and on qualified dividends increases to 20% for those in the 39.6% income tax bracket; the 15% rate for capital gains and qualified dividends continues to apply for those in lower brackets.

Phase out of itemized deductions and personal exemptions 

ATRA effectively increases tax rates for single taxpayers with incomes over $250,000, and over $300,000 for married joint filers, by phasing out itemized deductions and the personal exemption.

Estate, gift, and generation skipping transfer taxes, and portability

ATRA makes permanent the estate tax exemption amount of $5 million per person, increases the maximum estate tax rate to 40%, and applies this exemption amount and tax rate to gift taxes and to generation-skipping transfer taxes. The portability of unused gift and estate tax exemption amounts to the surviving spouse is also made permanent.

This information is not intended to be legal or financial advice and should not be interpreted as such. Please consult with your own legal and financial advisors to determine how these provisions apply to you. 

Questions?

Please contact the Law School’s Planned Giving Office by phone at 617-496-9265 or via email: cgordy@law.harvard.edu, for information on making gifts to the Law School from your IRA and on other giving opportunities.

Last modified: February 21, 2014

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