New Trump Tax Plan Caps Charitable Deductions

September 19, 2016       The NonProfit Times      

Republican Presidential candidate Donald Trump unveiled a revised tax reform plan last week that limits the deductions taxpayers may take, including the deduction for charitable contributions.

“We are surprised and disappointed that Mr. Trump caps the charitable deduction in his most recent tax reform proposal,” Sandra Swirski, executive director of the Alliance for Charitable Reform (ACR), said in a statement released after Trump’s revised tax reform plan was made public. “Cuts, caps and limitations on the deduction mean less money for charities and those they serve. That can’t be what Mr. Trump intends. The charitable deduction is not a loophole, it’s a lifeline,” she said.

The first tax reform proposal offered by Trump last year preserved the current charitable deduction. This latest version proposes to cap all itemized deductions – including the charitable deduction, mortgage interest deduction, and state and local taxes paid – to $100,000 for single filers and $200,000 for couples.

ACR argues that the revised tax plan alters deductions that hit donors who account for the bulk of individual giving.

“We reiterate our call for Mr. Trump to preserve the full scope and value of the charitable deduction,” Swirski said. “It is unique among all other credits and deductions because it encourages individuals to give away a portion of their income for the benefit of others. The donor is left worse off financially while the independent civil society is strengthened,” she said.

Trump’s latest tax reform plan proposes changing the individual income tax code by lowering marginal tax rates on wage, investment, and business income, consolidating seven tax brackets into three. The plan also would eliminate federal estate and gift taxes while eliminating step-up basis for estates valued at more than $10 million.

Democratic candidate Hillary Clinton has proposed a top estate tax rate of 45 percent while lowering the estate tax exclusion to $3.5 million in assets, according to the Tax Foundation. Her proposal also caps the tax benefit of itemized deductions at 28 percent of the deduction.