Senate Legislation Would Expand Charitable Deduction for People Who Don’t Itemize

New legislation in the Senate to provide Covid relief would expand the charitable deduction for people who don’t itemize their 2020 taxes to $600 for individuals and $1,200 for couples, according to the Alliance for Charitable Reform.

Before this year, people who didn’t itemize couldn’t deduct any charitable giving. Legislation enacted by Congress in March created a deduction of up to $300 to cover those people. That limit applies both to individuals and couples who file jointly, so the new Senate legislation would double the deduction for individuals and quadruple it for couples.

The Senate legislation is scheduled for a vote Thursday, but media reports indicate it has little chance of advancing.

Sandra Swirski, executive director of Alliance for Charitable Reform, praised the legislation in a news release. “Lawmakers clearly recognize the importance of driving resources to the charitable sector to provide critical services to communities across the country during these uncertain times,” Swirski stated.

The Alliance was created by the Philanthropy Roundtable, a network of donors and foundations, to provide information for policy makers.

David Thompson, vice president of public policy at the National Council of Nonprofits, also praised the expanded charitable deduction but complained the legislation lacks other key nonprofit needs including:

• Expanded eligibility for emergency loans, which are currently limited to nonprofits with 500 or fewer employees.
• Full federal reimbursement of benefits paid to employees by nonprofits that self-fund unemployment benefits. Under the stimulus bill enacted in late March, nonprofits must pay 50 percent of the costs of benefits provided to their laid-off employees.

Expanded Penalties

The Senate legislation would increase penalties for overstatement of a charitable deduction — but only for people who don’t itemize. Under current law, the penalty for an improper deduction is 20 percent for all taxpayers. The bill would raise the penalty to 50 percent for taxpayers who don’t itemize.

Thompson criticized that provision, saying it “seems to assume that some taxpayers are less honest than others.”