Wednesday June 20, 2018
Will Tax Reform Include New Charitable Deductions?
As the House Ways and Means Committee staff continues to draft a massive tax reform bill, a new proposal could expand charitable giving. This week, Rep. Mark Walker (R-NC) introduced the Universal Charitable Deduction Act (UCDA).
The UCDA proposes allowing "above the line" charitable deductions in an amount equal to up to one third of the new standard deduction. If the standard deduction is increased from $12,700 for married couples to a proposed level of $24,000, then couples who take the standardized deduction could also deduct up to $8,000 in charitable gifts. The deduction limits are lower for single persons, but they also would be able to take both the standard deduction and charitable gift deduction.
With the existing standard deduction, about 30% of taxpayers itemize and may deduct cash gifts each year up to 50% of adjusted gross income. However, the proposed tax bill would double the current standard deduction. If a larger standard deduction passes, there will be fewer taxpayers who itemize and take charitable deductions. The UCDA would permit most taxpayers to take the increased standard deduction and also claim their charitable gifts.
Two Washington associations of nonprofits welcomed the bill. Independent Sector President Daniel Cardinali stated, "This proposal would also move us closer to another important goal for Independent Sector making a tax incentive for charitable giving available to all those who pay taxes in the United States."
National Council of Nonprofits President Tim Delaney noted, "The nonprofit community was pleasantly surprised by the introduction of the Universal Charitable Deduction Act, a bill that would extend to all taxpayers a tax deduction for donations for the work of charitable nonprofits."
Editor's Note: Tax reform in 2017 is still a big challenge for Congress. On October 12, Speaker of the House Paul Ryan (R-WI) said he expects to pass a tax reform bill in November. Because this is a large legislative project, he is willing to keep the House Members in Washington until December 25. Ryan stated, "I do not care . . . We have got to get this done."
Published October 13, 2017
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