Tax plan doubles standard deduction, leaves charitable deduction in place

Written on Oct 10, 2017

Nonprofit leaders say they are pleased by the preservation of the charitable deduction, but wary of other changes that might hurt charitable giving, such as doubling the standard deduction and repealing the estate tax, under a framework for tax reform presented by Republican leaders.

Among the changes under the framework released Sept. 27, the tax reform proposal would:

  • Double the standard deduction to $12,000 for single filers and $24,000 for married taxpayers filing jointly
  • Repeal the estate tax
  • Increase the child tax credit while repealing most personal exemptions
  • Reduce seven tax brackets ranging from 10 to 39.6% into three tax brackets of 12, 25 and 35%, with a possible fourth bracket for the highest-income taxpayers
  • Reduce the corporate tax rate from 35% to 20%

The “Unified Framework For Fixing Our Broken Tax Code” is similar to a preliminary tax plan released by the White House in April, at least when it comes to provisions that impact the nonprofit sector and charitable giving.

Doubling the standard deduction would reduce the number of itemizers from about 1 in 3 taxpayers to about 1 in 20 and remove the tax incentive for an estimated $95 billion of annual charitable giving.

Removing the charitable deduction for most Americans could reduce giving by as much as $13 billion while expanding the deduction to all Americans could increase giving by almost $5 billion annually, according to a study by the Indiana University Lilly Family School of Philanthropy released in May. The study commissioned by Independent Sector estimated that making the charitable deduction universal for all taxpayers would make up that potential $13-million decline and possibly increase giving anywhere from $1.1 billion to $4.8 billion.

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