Tuesday, September 3, 2019
WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?
* An interesting development. Kelly Phillips Erb reports “Charitable Donation Deductions Plummet After Tax Reform” at FORBES.COM.
“According to the most recent data available from the Internal Revenue Service (IRS), just 12,177,779 taxpayers claimed the charitable donation deduction for the 2018 tax year, totaling $102.7 billion. That compares to 33,629,985 taxpayers who claimed the charitable donation deduction for the 2017 tax year, totaling $160 billion. That’s a difference of 21,452,206 taxpayers claiming nearly $37 billion less in donations.”
If I may be allowed one correction – it should read “After GOP Tax Act” and not “After Tax Reform”. The GOP Tax Act was, as its official title identifies, a tax cut and NOT tax reform.
This news does not necessarily mean that Americans are actually donating less to charity – it just means that they are claiming less tax deductions for charitable giving. In order to deduct a charitable contribution, one must itemize, and the GOP Tax Act resulted in a substantial decrease in the number of taxpayers who itemize. While being able to deduct one’s contributions is a plus – the tax savings from itemized deductions is pennies on the dollar. Giving $100 to charity may put $22 back in your pocket via an itemized deduction, but you are still out of pocket $78 – so I doubt very much that people give to charity only to get a tax deduction.
However, it may mean that the taxpayer in the above example will only donate $78 to the charity instead of $100 if they are unable to benefit from itemizing. In a tweet responding to a comment on the post KPE tells us studies suggest that actual contributions are also down.
And let’s be honest. While the issue is not as bad as it had been these past few years - a result of the more stringent documentation requirements - the amount of charitable contributions reported on Schedule A does not necessarily accurately reflect the actual amount of charitable contributions made. This category has historically been the one where taxpayers have truly been “generous” in their estimations (i.e. – “same as last year” or “whatever I am allowed”).
* Yesterday’s post at BOBSERVATIONS talked about “Found Money” – how I found it and how you can, too.
* In light of Hurricane Dorian Kay Bell explains “IRS and other government resources can help you deal with a natural disaster” at DON’T MESS WITH TAXES.
* And Kay reminds us not to forget about our four-legged “children” during a disaster with “7 tips to ensure your pets' safety during a disaster”.
* From ACCOUNTING TODAY – “Opportunity zones andcapital gains: What your clients need to know”.
* Just got the word from NATP -
“The General Services Administration (GSA) has released the federal domestic per diem rates for 2020. The IRS permits taxpayers to use these rates to substantiate business expenses for lodging, meals and incidental expenses incurred while traveling away from home.”
The new rates are effective October 1, 2019. Click here to access them.
THE FINAL WORD
Cutting taxes is not the answer to all of our problems. Taxing the rich, merely because they can afford it, is not the answer to all of our problems.
We must understand and acknowledge that the one and only purpose of the US Tax Code is to raise the money necessary to run the government – and should not be used for social engineering, to redistribute income or wealth or to deliver social welfare and other government benefits.
The Tax Code must not punish ambition, entrepreneurship or success. While it can be used to encourage savings, investment, and growth, it must not encourage or discourage specific economic decisions, or provide exclusive benefits for specific industries, business activities, or classes of taxpayers.