Reform A Manual for Enacting Tax Credits for Charitable Contributions 2. Implications for Taxpayers and Donors 2.
Most taxpayers are familiar with tax deductions.
Federal tax law encourages giving by offering deductions. Federal taxpayers who itemize can take tax deductions for the amount they contribute to eligible charities. This permits them to reduce their taxable income by what they contribute to these charities. A tax credit, on the other hand, permits the taxpayer to reduce his tax bill by some fraction of what he contributes. Some proponents of the flat tax believe that a charitable tax credit is not compatible with a flat tax.