Very few people choose to give money or assets to charity simply because of tax benefits. However, research from the Congressional Budget Office indicates that tax incentives typically increase how much people are willing to donate whether when they pass away or over the course of their life.
With tax reform on the table that could potentially eliminate or reduce tax breaks for giving, charity experts and advocates are extremely concerned. A current proposal would double the standard deduction, repeal the estate tax, and lower income tax rates. Although it is an assumption that the charitable deduction would stay in place, the increase of the standard deduction would mean that far fewer people would be able to itemize and claim the break for giving to charity, but lowering tax rates would also make the deduction worthless for those who still choose to take it.
This could potentially reduce charitable giving between $5 billion and $13 billion a year, according to a research study completed at Indiana University.
The greatest negative effect of the proposed tax reform is the increase of the standard deduction because it would reduce those who itemize down to just 5% of income tax filers, currently 30% of individuals itemize today. The only reason to itemize is if your deductions are greater than the value of the standard deductions. Those other 25% of people who used to itemize their taxes may give some but not as much. If you are interested in how charitable giving can be incorporated into your estate plan contact a lawyer.
