Wednesday, November 8, 2017


Over at DON’T MESS WITH TAXES earlier this week, Kay Bell suggested “Tax reform could cost charities $13 billion a year”.

I don’t agree that reducing the number of itemizers will so substantially reduce charitable giving.  The post indicates that currently about 1/3 of taxpayers itemize.  But certainly more than 1/3 of taxpayers contribute to charity.  I do not itemize and I contribute to charity.  If I were able to itemize I would not give any more than I normally would just to get a tax deduction.

Taxes are pennies on a dollar.  A $100 charitable contribution may save $15 or $25 or more in federal taxes if you currently itemize.  But, as with any other deductible item, the purpose for spending the money for the item is not just to get a tax deduction – or it SHOULD not be.  That would be stupid.  There is no sense or logic in spending $100 to save $25 – you are still “out of pocket” $75. 

Being able to deduct charitable contributions is just an added benefit to the gift – an additional “thank you” – and not the primary motivating factor.  People who have always given to church and charity are not going to automatically stop just because they can no longer itemize and claim a tax deduction for their gift.

The ability to itemize can affect the timing of the contribution – sooner instead of later – when it comes to year-end tax planning.  For example, many current itemizers who may not be able to itemize in the future under the GOP proposal will “accelerate” their contribution and give money that they were going to give to charity in 2018 in November and December of 2017.

If a $100 donation, which previously only cost $75, will actually now cost $100, perhaps in some cases a person may only give $75 instead.  But I do not think that will happen on a grand scale.

Taxpayers often don’t know if they will be able to itemize until they actually prepare their return.  In 45 years no client has ever called or emailed me before giving to charity to ask if he will be able to itemize, waiting for my answer before making the contribution.


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