Charitable Deductions: Are They Really Deductible?
By Teresa Ambord
Are you one of the millions of generous Americans who gives to charity? Generosity is a hallmark of Americans, especially in times of crisis. And as a reward, we get to deduct those charitable donations from our taxes. Or do we?
Who Really Gets To Deduct?
Seventy-one percent of taxpayers do not get that option. Why? Because under the current system, only those taxpayers who itemize are eligible. Most people refer to itemizing as filing the long form. And people who file the long form are generally those who have home mortgages. The mortgage interest they pay will usually boost their itemized deductions higher than the standard deduction.
The fact is, the most generous segment of society is the lower to middle income group, and they are most likely the ones who are denied the deduction.
Does Anybody Care?
But the good news is, both political parties and the Bush Administration are working to change this. The Charitable Giving Tax Relief Act, introduced by Rep. Phillip Crane, has wide bipartisan support, to try and introduce a measure of fairness to the tax code, at least when it comes to charitable giving.
If this tax reform passes, non-itemizing taxpayers will be able to deduct half of their contributions above a certain amount.
What Effect Will This Have On Charities?
A study by accountants Price Waterhouse Coopers estimates that allowing non-itemizers to deduct charitable gifts will:
- Create more than 11.7 million new givers throughout the country
- Stimulate an additional $14.6 billion in charitable giving in the first year and more than $160 billion over 10 years.
- Increase current giving levels by 11%.
Congressman Crane says this: "Charity benefits both the giver and the receiver in like proportions. The act of giving elevates the heart of the giver. The act of receiving elevates the condition of the recipient. Charity is thus a blessed act that should suffer no discouragement from something so mean as the tax code."
"The non-itemizer deduction recognizes a group of taxpayers whose donations are the lifeblood of charities," said John Seffrin, CEO of the American Cancer Society. "Our tax system should acknowledge and reward the generosity of all taxpayers, including those whose hearts may be larger than their wallets."
How Will Increased Charity Tax Deductions Affect The Treasury?
Charitable giving is said to be "dollar efficient," because the charities would receive more in donations than government would lose in tax revenue as a result of this change. In fact, the Beacon Hill Institute for Public Policy Research estimates that for every dollar of additional charitable gifts, the Treasury will lose only about twenty cents.
Letter To President Bush
You can read the letter that 500 diverse nonprofit organizations recently sent to President Bush, who has made the non-itemizer deduction a key part of his proposed tax package.
To see a list of FAQ about the non-itemizer charitable deductions, go to:
