NCPA - National Center for Policy Analysis

New Tax Deduction For Charitable Donations

March 7, 2001

President Bush's tax plan would allow nonitemizers to deduct their charitable gifts, in addition to the standard deduction. Under current law, only taxpayers who itemize deductions may deduct charitable gifts.

Until recently, the Treasury hadn't said where the new donation deduction, if enacted, would go on tax forms. Would it be above the adjusted gross income line, or below?

  • "Above-the-line" deductions are more significant since they reduce adjusted gross income, which in turn can affect the amount of several tax credits and other items that taxpayers may claim.
  • About seven out of 10 returns don't itemize; instead, they take the "standard" deduction.
  • This new donation deduction would be limited to the amount of the standard deduction.

The Joint Committee on Taxation, in estimating the proposal's cost, assumed it wouldn't be above the line, and senior Treasury officials say the deduction wouldn't go above the line and wouldn't affect adjusted gross income.

Source: Tom Herman, "Mystery Solved: Treasury officials answer a taxing question," Tax Report, Wall Street Journal, March 7, 2001.

For text (requires WSJ subscription)


Browse more articles on Tax and Spending Issues