Giving to charity has always been a prudent way to reduce income taxes. But suddenly the value of charitable giving has increased dramatically, especially for people in higher tax brackets who own their own businesses.
Thanks to the Omnibus Budget Reconciliation Act of 1993, the maximum marginal income tax rate has increased from 31 percent to 40 percent. If you are in the top bracketâif your annual taxable income exceeds $250,000âthis means that the value of charitable deductions has increased by almost 30 percent. Even if your rate has increased from 31 percent to 36 percent, you will realize a significant 16 percent increase in the value of income tax savings resulting from charitable gifts. Furthermore, the Act did away with the alternative minimum tax, which added extra burdens on wealthy individuals who gave appreciated property to charity.