Tax Law Proposal Would Allow Non-Itemizers to Deduct Charitable Gifts

Tax Law Proposal Would Allow Non-Itemizers to Deduct Charitable Gifts

The Wall Street Journal reports that Congressional staffers and tax lobbyists say chances are improving for tax-law changes that would benefit millions of people who give money to charity but aren't allowed to write off their donations because they take the standard deduction on their tax returns.

Roughly two out of every three tax filers take the standard deduction — a flat amount based on filing status — instead of itemizing their deductions. The proposed changes would allow filers who take the standard deduction to deduct charitable gifts up to a certain amount — $100 in 2002 and increasing from there — without having to itemize. The president and Republican leaders have lined up solidly in favor of the changes, as have organizations such as Independent Sector, a coalition of more than 700 nonprofits, foundations, and corporate philanthropy programs.

According to a Treasury Department publication summarizing the Bush administration's revenue proposals for fiscal year 2003, "A combination of government and private efforts is necessary to help people in need. Approximately two-thirds of tax filers are non-itemizers, and thus are not allowed to claim tax deductions for their charitable contributions. Allowing non-itemizers to deduct their charitable contributions would help increase support for charitable organizations by rewarding and encouraging giving by all taxpayers."

Critics of the proposal argue that the plan is too expensive and cite Treasury Department estimates that put the revenue lost if the changes become law at more than $32.6 billion through 2012. In addition, a number of former IRS commissioners have come out against the changes on the grounds that the standard deduction already includes an unspecified amount for charitable gifts as well as a concern that an additional deduction for charitable gifts could lead to an increase in tax fraud.

Tom Herman. "Taxpayers Who Take Standard Deduction May Soon Be Allowed to Write Off Gifts" Wall Street Journal 05/15/2002.