How much do you contribute to Charity?
November 1, 1999
Because of Hurricane Floyd many North Carolinians will be contributing to charity. Now is a good time to plan your charitable giving for the rest of 1999.
How much of your income do you contribute to your church and other charities? 71 percent of North Carolina taxpayers do not itemize deductions on their income tax form. If you do not itemize you probably do not know how much you contribute.
The North Carolina General Assembly passed laws in 1996 and 1998 to allow state taxpayers who do not itemize to receive a tax credit for their charitable contributions. This new law was partially in effect for 1998 but is greatly improved for 1999 gifts.
Why is this credit important? 29 percent of taxpayers take a full deduction for their charitable contributions because they itemize all their deductions. But the 71 percent of North Carolina taxpayers who do not itemize take a standard deduction. This standard deduction recognizes an average of 2 percent in charitable contributions. But many taxpayers, especially lower and middle income taxpayers, contribute much more than 2 percent of their income to their church, their synagogue, the local rescue squad, an arts group or other charities. Because the majority of taxpayers do not itemize they do not even keep track of the amount of their total charitable contributions. By allowing a 7% credit for contributions that exceed the 2 percent average the tax system is now more fair to non-itemizers. It gives non-itemizers an incentive to increase their charitable giving.
Let's use several examples. A husband and wife earn together $40,000 per year. They contribute $4,000 to charity. Under this new law they would receive a credit of $224.00 on their state income tax return. A single taxpayer earns $50,000 per year and contributes $3,000 to her church. Her credit would be $140.00. A widower earns $30,000 per year and contributes $3,000 to his church. His credit would be $168.00. A family earns $60,000 per year and contributes to all charitable causes $6,000. Their credit is $336.00.
Of course those taxpayers who do not itemize because they do not like paperwork do not have to claim the credit. But the computation takes only a few moments and should be a help to non-itemizers who contribute to their church or to a charity.
NOTE: Paul Stam is a partner in the Apex law firm of Stam, Fordham & Danchi, P.A. He served as a public member of the North Carolina House of Representatives Select Committee on Non-Profits in 1995-1996. See Session Law 1998-183 and G.S. 105-151.26.