The idea of tax deductions for high income earners must sound preposterous, especially if you’re a high income earner. You know how it goes, you try donating money to charity or taking advantage of any of the other tax deductions only to find that your deduction is “limited due to your income.” So what’s the point?
Well this year, there is a point. Itemized deductions and exemptions aren’t phased out for high income taxpayers for 2010. Last year, if you earned over $166,800 you started to lose out on your deductions. The higher your income, the less valuable your deductions were. Only for 2010 are you allowed all of your itemized deductions. You also get 100% of your exemptions also.
But what about the Alternative Minimum Tax or AMT? Won’t that get us anyway? Well, yeah. AMT is a problem for high income earners. But, and this is important, charitable deductions aren’t eliminated in the AMT calculation. AMT dings you for your state tax payments, miscellaneous deductions (like employee business expenses), and some types of mortgage payments. Your charitable contributions still count as a deduction in the AMT calculation. Even if you’re stuck paying AMT, you’re still better off having that charity deduction on your tax return.
Bottom line: If you are a high income earner, there has never been a better time for you to make a charitable contribution.
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