Possible Fix Coming to Charitable Gifting Problem

For many taxpayers, the 2017 tax law changes removed an incentive to many taxpayers to make charitable contributions. As an itemized deduction, charitable contributions provide a deduction only to taxpayers who itemize their deductions. With a much larger standard deduction, and reductions in available deductions for state and local taxes and mortgage interest, many taxpayers who used to itemize will no longer do so. This is especially true for lower and middle income taxpayers. Thus, many charities expect reductions in gifting to them do to the loss of income tax benefits to donors.

A bipartisan bill, the Charitable Giving Tax Deduction Act, has been introduced into the House of Representatives that would address this issue. The Act would make charitable deductions an “above-the-line” deduction. This means that taxpayers can deduct contributions against their income, whether or not they itemize their deductions. The income tax incentive to make charitable gifts would thus be restored, and even enhanced from the pre-2017 tax law changes.

Whether the bill will pass is anyone’s guess at this time. Its bipartisan support and its charitable nature probably gives it more of a shot to pass than most bills.