Senate Legislation: Deductible Charitable Contributions for Non-Itemizers

The Tax-Relief Act of 2005 (S.2020), passed earlier this year by the Senate, would allow taxpayers who do not itemize deductions on their federal income tax returns to take a charitable contribution deduction for total cash contributions in excess of $210 ($420 for married couples filing jointly).  This particular provision of the Act is intended to be in effect for 2006 and 2007, unless extended by Congress, and is supported by Independent Sector ("IS"), a nonprofit leadership forum and coalition of about 500 organizations.

In the IS Fact Sheet on The Charitable Deduction Changes for Itemizers and Non-Itemizers In S.2020, the Tax Relief Act of 2005, the following benefits and disadvantages of the provision are discussed:

BENEFITS

  1. Increases giving by extending the charitable contribution deduction to 86 million taxpayers who do not itemize deductions.
  2. Increases fairness by treating all taxpayers who make charitable donations on a more even basis.
  3. Simplifies the tax incentives for charitable giving as "above-the-line" deductions which lower the taxpayer’s adjusted gross income.
  4. Provides a modest tax benefit for low- and middle-income taxpayers, who make up the majority of non-itemizers.
  5. Is achivable this year.

DISADVANTAGES

  1. Reduces the tax benefit the 38.6 million taxpayers who itemize deductions currently receive for their charitable contributions because itemizers would no longer be able to deduct the first $210 of their charitable contributions ($420 for married couples filing jointly).
  2. May make tax administration for the IRS more difficult.