New Universal Tax Break for Charitable Giving

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) today released a detailed summary of the $2 trillion stimulus bill in the Senate aimed at responding to the economic wreckage caused by the pandemic. One smaller, less noted provision represents something that charities have been seeking since the Trump tax cuts of 2017 hampered charitable giving: an above-the-line charitable income tax deduction. 

Under the 2017 tax law, the standard deduction was increased so much that way fewer people are itemizing deductions, including for gifts to charity, such as Giving Center. The proposal in the stimulus would let non-itemizers take up to a $300 above-the-line charitable income tax deduction for cash donations made in 2020. So for folks who take the standard deduction, if you give $300 to Giving Center, you’d get the $300 tax break in addition to the standard deduction ($12,400 for individuals and $24,800 for married couples filing jointly).

That wouldn’t mean a lot to an individual’s pocket book. If you’re in the 10% tax bracket, it would be worth $30. If you’re in the 37% tax bracket, it would save you $111. (Note: The fact that it’s an above-the-line deduction can also help because it reduces your adjusted gross income, which can then mean you qualify for other tax breaks.The summary of the bill says that the new $300 tax break would apply just for 2020, but the text of the bill says that it would apply to tax years beginning in 2020. That would be a big victory for charities. Even if the new universal deduction is in place just for 2020, that sets a precedent for making it permanent, or possibly even expanding it with a higher cap—or no cap.

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