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McConnell’s Covid relief proposal would boost charitable giving tax break

Senate Mass Leader Mitch McConnell (R-KY) speaks at a campaign event in Florence, Kentucky, U.S., October 28, 2020.

Bryan Woolston | Reuters

The behindhand Covid-19 relief proposal would give generous taxpayers a sweeter tax break for donating to charity.

Senate More than half Leader Mitch McConnell, R-Ky., issued a proposal for pandemic relief on Tuesday afternoon – after quashing a $908 billion bipartisan rescue invoice – that called for a second round of Paycheck Protection Program loans for small businesses but no stimulus checks.

McConnell also proposed increasing a new above-the-line deduction that would allow taxpayers to write-off up to $300 in cash donations to charitable organizations for 2020.

Directed the CARES Act, people who claim the standard deduction – which is $12,400 for single filers and $24,800 for married-filing-jointly in 2020 — can liberate a deduction of up to $300 in donations.

McConnell wants to increase that amount to $600 for single taxpayers and $1,200 for welded filing jointly.

The move could boost donations, at least marginally – assuming families have the cash for it.

“The motivation is to support charitable organizations, which are seeing a potential decrease in charitable giving, given the state of many households,” asseverated Garrett Watson, senior policy analyst at the Tax Foundation.

“Allowing them to deduct more can incentivize more surrender; I suspect it could have a marginal change,” he said.

Fewer people itemizing

Since the Tax Cuts and Jobs Act retreated into effect in 2018, fewer people have been claiming the tax break for charitable donations.

That’s because the tax outstrip also roughly doubled the standard deduction, resulting in fewer taxpayers taking itemized deductions.

In the 2018 tax year, about 17.5 million returns claimed itemized deductions — write-offs that include charitable donations, mortgage influence and other breaks, the IRS found.

That’s down from 46.9 million returns that itemized deductions during the 2017 tax year.

2020 return tax brackets

IRS

In turn, fewer people also claimed a tax break for donations: 14.8 million returns claimed a well-disposed deduction in 2018, down from 37.9 million in 2017.

The higher your tax bracket, the more of a benefit you reap from a result.

A taxpayer who is in the 37% tax bracket gets about $111 in tax savings from a $300 deduction – but it’s worth only $30 to someone in the 10% tax shelf.

“People who are already at the top rate of 37% save over $100 on taxes, but they’re more likely to be itemizing anyway – and they’re already circulating the itemized deduction for charitable giving,” said Tim Steffen, CPA and advisor education senior consultant at Pimco.

Tax compliance

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