Return to FAQs

The charitable deduction is more at risk today than at any time I have seen.

The Budget Control Act of 2011 raised the federal debt ceiling. The bill raised the debt limit by $2.5 trillion in two stages, which will provide the Department of the Treasury with enough borrowing authority to last until 2013. This increase is paid for by an immediate $1 trillion in cuts from defense and discretionary spending. A 12-member bi-partisan congressional committee is tasked with recommending an additional $1.5 trillion in savings by November 23. Assuming the committee can cobble together recommended savings of $1.5 trillion, Congress has until December 23 to pass those recommendations—without any changes. If the committee fails to make recommendations or if Congress fails to pass them, then automatic spending cuts to defense, domestic discretionary programs, and Medicare will be triggered. (It is important to note that these cuts will not take effect until one year later, January 1st, 2013.)

Tax changes were not included in this "deal," but the Administration and congressional Democrats expect the 12-member committee to contemplate tax increases and tax reform, and that will likely include the charitable deduction, among others. So, yes, limiting the charitable tax deduction has the risk of being limited by Congress in dealing that will take place by November 23, 2011.

Dan Busby is a certified public accountant, president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.