Of all of the itemized deductions, the main one for charitable contributions might seem ahead out the very best under tax reform. That’s because it’s the only real deduction under both homely house and the Senate versions of the bill that’s largely undiminished. And charities complain donations will dry out under tax reform yet. What gives?
“Provisions in the goverment tax bill the homely house and Senate are thinking about would make the problem worse” for charities, Ray Madoff, director of the Boston College Law School Forum on Philanthropy and the general public Good, says in a Nov. 27 NY Times.
The nagging problem, Madoff says, may be the near doubling of the typical deduction. Challenging other itemized deductions either going or constrained by new caps away, most households will choose the standard deduction than continue steadily to itemize rather. That renders the tax deduction for charitable giving meaningless nearly. As Madoff puts it, “A massive most American taxpayers would no more itemize and for that reason would receive no benefits because of their charitable giving.”
That argument may problem. It’s exactly the same one NAR is making about homeownership. Beneath the Senate bill, the mortgage interest deduction will be left intact, however the deduction for state and local taxes would disappear completely. In the homely house, MID will be limited by mortgages of $500,000 and the deductions for property taxes will be capped at $10,000, as the deduction for state and local sales and taxes will be entirely repealed. So, while MID is preserved, either or partly entirely, today would continue steadily to do so hardly any households that itemize. As a total result, MID would continue being a benefit limited to the wealthiest households.
Given the structural changes to the tax code lawmakers have before them, preserving the deduction for charitable contributions is meaningless mostly. This is actually the ditto REALTORS® exactly; say about tax incentives for homeownership. They’re meaningless for some households if tax reform passes in its current form in both House and the Senate.
More on tax reform’s effect on homeowners in.