Both Donald Trump and Hillary Clinton say they are protecting the charitable deduction in their tax plans. Hillary Clinton initially proposed limiting the charitable deduction to the 28% tax rate even if the donor was in a higher bracket, but at the AFP Conference in March, she backed away from this proposal. Donald Trump excludes the charitable deduction from his cap on certain itemized deductions.
Both candidates, however, include features in their tax plans that limit the benefits of charitable giving. Donald Trump proposes to increase the phase out rate of itemized deductions of the Pease Amendment from 3% of AGI to 6% AGI. The Pease Amendment applies to the charitable deduction, so his plan will limit its benefit for many higher income taxpayers more than the current law. Donald Trump’s otherwise lower marginal rates also reduce the benefit of charitable giving.
Hillary Clinton proposes a 4% surtax on AGI over $5 million and a second “Buffet” Rule minimum tax for taxpayers with AGIs over $1 million that could limit the benefit of charitable gifts. Both sets of proposals are subtle and complicated changes to the Code, making their ultimate impact on charitable giving hard to predict. Under either plan, taxpayers will have a harder time calculating the after tax cost of a proposed charitable gift.