Ahead of the Senate hearing on “Offshore Profit Shifting and the U.S. Tax Code,” I released a report reminding us that contrary to the perception created by these types of political spectacles, corporations pay a...
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High-Income Taxpayers Should Maximize Charitable Contributions, Itemized Deductions in 2010
If high-incometaxpayers are contemplating a major charitable gift in the near future, 2010 is the year to do it -- before restrictions on itemized deductions return in 2011 from a one-year hiatus. The so-called PEP and Pease provisions of the federal individual income tax, which limit the benefits of the personal exemption and itemized deductions for taxpayers over a certain income level, have been repealed for 2010 but are scheduled to return in 2011.
A new Tax Foundation special report, "PEP and Pease: Repealed for 2010 But Preparing a Comeback," authored by Chief Economist Patrick Fleenor, explains the history of the provisions and outlines how the reinstatement of the tax laws will affect taxpayers at various income levels under President Obama's budget.
PEP and Pease have created significant problems, raising marginal tax rates and adding to tax complexity. In some cases, PEP and Pease push the marginal tax rate up substantially. Next year, under President Obama's budget, a married couple filing jointly with combined AGI of $254,550 would pay a 28 percent rate without PEP and Pease, but a 30.5 percent rate with PEP and Pease.
The report is part of a longer Tax Foundation series analyzing the effects of the expiration of the Bush tax cuts.
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The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.