Why 2012 Is a Great Year to Make a Philanthropic Gift

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Overview

On June 28, 2012, the Supreme Court ruled that the Affordable Care Act (ACA) is constitutional. In so ruling, the Supreme Court confirmed that Congress has the power to require healthcare coverage for 30 million people who might otherwise be uninsured. The Supreme Court’s holding is significant to higher-income taxpayers. The ACA’s revenue provisions call for imposing a 0.9% Medicare health insurance tax and a 3.8% tax on “investment income” on individuals with gross income of $200,000 or more per year (or $250,000 or more on married individuals filing jointly). Assuming that the ACA will not be repealed in the coming weeks, taxpayers should prepare for income taxes to significantly increase on January 1, 2013.

In addition to the taxes described above, the special tax rates on long-term capital gains and qualified dividends will expire on December 31, 2012. Starting January 1, 2013, the tax rate on long-term gains will rise from 15% to 20%. Also starting in 2013, the distinction between ordinary and qualified dividends will disappear, and all dividends will be subject to the ordinary tax rates (39.6% or higher for high-income taxpayers). It is likely that these tax increases will go into effect as a supplement to the ACA’s revenue provisions.

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