What impact does the fiscal cliff deal have on nonprofit fundraising? This is the question that has been on every nonprofit’s mind ever since the ‘fiscal cliff’ was averted by Congress on the last day of 2012. Everyone around the country (and the world) heaved a sigh of relief that we were not plummeting down the cliff albeit the deal meant higher taxes. While it was anticipated that the deal will bring with it an increase in taxes, it wasn’t widely expected that the deal will be good for nonprofit fundraising. This was mainly because it was feared that there would be a cap on the maximum amount of tax deductions on the contributions made towards charitable purposes. And even though there may be people who would not seek any incentive in contributing to charities, let’s face it; a tax deductible donation does seem more attractive to many people rather than one that would give no tax benefits. Therefore, it was assumed that people would contribute only as much as they could claim as a tax deductible donation which would (possibly) mean lesser donations (from the wealthy in particular). However, the fiscal cliff deal could actually be good for nonprofits and potentially increase charitable giving. How is this possible?The main reason for this, according to the Urban Institute Center on Nonprofits and Philanthropy, is the fact that the deal does not limit tax breaks for charitable donations which means that taxpayers can continue to deduct charitable donations at their full marginal tax rate. What this translates to is that taxpayers can now reduce their tax liability by a higher percentage due to the increased marginal tax rates. For example, if a taxpayer in a 35% tax bracket could reduce his tax liability by 35 cents for every $1 in charitable donation, he can now reduce it by 39.6 cents since the tax rate for his bracket has gone up to 39.6% Thus, the cost of giving has actually gone down! There are more provisions in The American Taxpayer Relief Act of 2012 that could have a positive impact on charitable giving. The Urban-Brookings Tax Policy Center's Urban Institute on Nonprofits and Philanthropy outlines them in summary form in this fact sheet. Therefore, nonprofits should continue their fundraising efforts with gusto and make sure that their contributors know the positive impact of the fiscal deal on charitable donations. ~Ramya