Extending the Charitable Deduction to Nonitemizers

Frequently Asked Questions

Question:
What is the charitable deduction for nonitemizers?
Answer:
The charitable deduction for nonitemizers will allow all taxpayers to deduct their charitable contributions from their taxable income. At present, only those who itemize can deduct their charitable contributions. Those who take the standard deduction get no incentive from the tax code to give, or to give more.

Question:
How many Americans do not receive a tax benefit for their charitable contributions?
Answer:
Eighty-five (85) million Americans, or about two-thirds of all taxpayers, claim the standard deduction on their annual tax return. All of them could benefit if they make charitable contributions, depending on the structure of the deduction.

Question:
Does not the nonitemizer charitable deduction allow taxpayers to get a double benefit since the standard deduction includes an amount for charitable giving?
Answer:
Congress has never stipulated that the standard deduction include a specific amount and/or percentage for charitable giving. In fact, from 1981 to 1986, taxpayers who claimed the standard deduction were allowed to take a separate deduction for their charitable contributions. Since that provision was allowed to sunset in 1986, taxpayers who claim the standard deduction do not receive a tax incentive to make charitable contributions. 

Question:
How much impact could the nonitemizer charitable deduction have on charitable giving?
Answer:
The impact on charitable giving is determined by the structure of the nonitemizer charitable deduction. The nonitemizer charitable deduction could be structured to include either a floor or a ceiling. Both of these types of structure influence giving. For example, a floor is more favorable for encouraging increased giving --- ensuring that individuals exceed what they are currently giving. Conversely, a ceiling is more favorable for encouraging new givers and low-income nonitemizers who are considering making gifts early in the year but often will not know whether they will be able to make total gifts in excess of an established threshold. What is certain is that an analysis of data from the IRS Statistics on Income Bulletin (Spring 2000) shows that regardless of their income level, taxpayers who receive a deduction for their charitable contributions give considerably more to charity than those who do not receive a deduction.

Question:
Would the nonitemizer charitable deduction included in H.R. 7 and S. 592 encourage giving by those who have not given before?
Answer:
It is unclear at this juncture whether the nonitemizer charitable deduction provision included in the Community Solutions Act of 2001, H.R. 7 would generate any new giving or negatively affect current giving. The nonitemizer provision included in H.R. 7 allows nonitemizers to claim a $25 deduction for cash contributions and over time it increases to $100. For joint filers, the amount is double. Keep in mind, nonitemizers on average contribute $328.00 annually. Thus, the proposal in H.R. 7 could potentially lead taxpayers to give less, since the tax benefit is significantly lower than their current level of giving. In comparison, the Savings Opportunity and Charitable Giving Act of 2001, S. 592 includes a nonitemizer provision that includes a $500 floor for individual taxpayers and $1,000 for joint filers. After the floor is exceeded the deduction is phased in from 50 to 100 percent over 5 years. The Charitable Giving Relief Act of the 106th Congress included an even less generous nonitemizer provision than S. 592 whereby the deduction would be for 50 percent of contributions made after the first $500 of annual contributions. According to Price Waterhouse, this proposal would have generated $17 billion of additional giving to charitable organizations over a five-year period. Therefore, we can assume that the nonitemizer charitable deduction contained in S. 592 would generate even more giving because of its more generous structure.

Question:
What types of charitable organizations would likely benefit most from the increased giving?
Answer:
All charitable organizations would benefit, depending on the giving patterns of nonitemizers. Religious organizations are the largest beneficiary of American charitable giving and thus programs run by religious groups would benefit. Other primary beneficiaries would be educational organizations and human service groups.

Question:
Does the Administration and Congress support the nonitemizer charitable deduction?
Answer:
Yes. President Bush included the nonitemizer charitable deduction in his first budget request to Congress. In the 107th Congress, the nonitemizer deduction has been included in several different bills, although with slight variations. Three bills in the House and four in the Senate contained a nonitemizer deduction. 

Question:
How much bipartisan support is there in Congress for this proposal?
Answer:
H.R. 7 that recently passed the House included a charitable deduction for nonitemizers. The Democratic Substitute included a nonitemizer deduction as well. Senators Santorum (R-PA) and Lieberman (D-CT) introduced S. 592 in the Senate. The bill has also garnered a bipartisan list of co-sponsors in the Senate.

Question:
What other advantages does the charitable deduction for nonitemizers offer?
Answer:
The charitable deduction for nonitemizers increases tax fairness by treating all taxpayers who make charitable donations equally under the tax code. It also provides tax relief to all nonitemizers, the overwhelming majority of whom are low-and middle-income.

Question:
Why should the charitable deduction be treated differently than other deductions for nonitemizers?
Answer:
The charitable deduction is the only deduction that provides no personal benefit to the contributor. Americans give to charitable causes to strengthen their communities and to help the needy.

Question:
Does the nonprofit community support the charitable deduction for nonitemizers?
Answer:
Hundreds of major national nonprofit organizations, representing thousands of state and local nonprofits, have endorsed the charitable deduction for nonitemizers.

Question:
How much would H.R. 7 and S. 592 cost the U.S. Treasury?
Answer:
According to the Congressional Joint Committee on Taxation, it is estimated that the nonitemizer provision contained in H.R. 7 would cost $6.4 billion and in S. 592 would cost $68 billion over 10 years. S.592 would cost significantly more because it will encourage more taxpayers to increase giving as compared to H.R. 7.