Revenues
Curtail the Deduction for Charitable Giving
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
| Billions of dollars | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2015-2019 | 2015-2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Change in Revenues | 4 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 87 | 213 |
Source: Staff of the Joint Committee on Taxation.
Note: This option would take effect in January 2015. Estimates are relative to CBO’s April 2014 baseline projections.
Current law allows taxpayers who itemize to deduct the value of their contributions to qualifying charitable organizations. The deduction is restricted in two ways. First, charitable contributions may not exceed 50 percent of a taxpayer’s adjusted gross income (AGI) in any one year. (AGI includes income from all sources not specifically excluded by the tax code, minus certain deductions.) Second, the total value of certain itemized deductions—including the deduction for charitable donations—is reduced if the taxpayer’s AGI is above a specified threshold.
This option would further curtail the deduction for charitable donations while preserving a tax incentive for donating. Only contributions in excess of 2 percent of AGI would be deductible for a taxpayer who itemizes. That amount would still be subject to the additional reduction described above for higher-income taxpayers.