By Dr. Louis Alpert
Now that the time for filing our 2018 Federal Income Taxes has reached its end, it is important to call attention to the fact that in high tax states in which the limitation on deductions of no more that $10,000 of the state and local taxes (SALT) has made it more favorable for many filers who itemized in prior years on their federal income tax returns, to merely opt to use the standard deduction, which has at least doubled compared to the 2017 tax year! Thus traditionally generous Americans in these high tax states have had less incentive to donate to charitable causes in 2018.
In this tax year, millions of relatively small donations from moderate-income people to mainstream charities has been sharply reduced. That means charity would become less of a middle-class enterprise and a more exclusive domain of the wealthy, who tend to contribute to arts and cultural institutions, research facilities and universities.
To get down to specifics in this new tax code, the new standard deduction would have been used in this tax year by an estimated 90 percent of Americans, jumping to $12,000 for individuals and $24,000 for married couples, with even an additional bonus for senior citizen taxpayers. This means many taxpayers who previously itemized their deductions found out that it was no longer beneficial to do so, especially in the high tax states. They found out that the deductions they normally take, including charitable giving, don’t add up to as much as the new standard amount!
As a result, some estimates project that as few as 10 percent of taxpayers itemized in this tax year, down from about 33 percent in the 2017 tax year!
“We’re very concerned,” said Steve Taylor, senior vice-president and counsel for public policy at the United Way. “A lot of charities are in shock. Charities feel totally abandoned and like we have ‘been thrown under the bus’ in the tax overhaul.”
The Ombudsman Alert concludes this column by requesting our Congresswoman Nita Lowey to investigate possible legislation that addresses the need to amend the new tax code to safeguard these charitable deductions in subsequent tax years even for individuals who opt to take the standard deduction when filing their taxes.
Please address all comments and questions to [email protected].