Question

discuss the potential implications of the charitable contribution deduction after changes to the tax law.

Answer 1

The potential implications of the charitable contribution deduction after changes to the tax law:

1)Since the limit on the cash contributions has increased , this will encourage the richer donors to come forward and donate upto 60 % of their adjusted gross income towards charitable activities.

2)Since the tax rates have decreased for majority of the taxpayers in the various tax brackets, the taxpayers will be paying lesser taxes than what was paid before so the taxpayers are left with more income which they can divert towards charitable contribution.

3)Since the extremely rich tax payers are subject to estate duty they will go in for more charitable contributions in order to claim the income tax charitable deductions.

4)Due to the increased standard deductions and changes to other deductions like state tax and local taxes , there could be a decrease in the overall charitable contributions. Since fewer taxpayers are itemizing their deductions the effect would be that the charitable contributions would go down as the taxpayer contributor would not be able to reduce their personal income taxes.