May 21, 2010
PEP & Pease Please
If ever there was a year to think about upping your charitable giving, this is the year. If you make over $200,000 a year, here are two big reasons why.
PEP and Pease. They aren’t the names of a rock band or an auto repair place. PEP (personal exemption phase-out) and Pease (itemized deduction phase-out named after Representative Donald Pease (D-OH)) are two relatively obscure tax provisions which have the effect of limiting deductions (including the charitable deduction) and the personal exemption for higher income tax payers.
Although they’ve been in place for over twenty years, they were gradually phased-out beginning in 2006. This year, they disappeared altogether, restoring the full value of the charitable deduction to the taxpayer.
We don’t expect PEP and Pease to disappear for long. Indeed we expect them to roar back with a vengeance in 2011. Which is why, if you are considering a major charitable gift, now might just be the right year to make that gift.
For more on PEP and Pease, see this Special Report from the Tax Foundation: