They bring a double benefit: the value of the deduction itself and the lowering of adjusted gross income, which may help them qualify for other deductions and credits.
But tax policy experts say that for all its popularity, the value of the deduction in public policy is debatable.
Such a cap would reduce the value of the deduction for state and local income taxes, which has been part of the federal tax code for a century (though the deduction has been diluted by the alternative minimum tax).
Capping the value of the deduction, as the White House has suggested, might reduce giving by as much as $7 billion a year out of $300 billion over all, according to an estimate by Independent Sector.
It should be kept in mind, however, that if the top tax rate falls to 25 percent from 39.6 percent, as Representative Dave Camp of Michigan, the Republican chairman of the House Ways and Means Committee, says he hopes, this action alone will automatically reduce the value of the deduction by almost half.
For one thing, the value of these deductions and exclusions is capitalized into prices.
Surplus production is often sold to overseas markets at a discount that brings food manufacturers more than the value of the tax deduction of a charitable donation, food bank managers across the country said in interviews.
By contrast, the value of the charitable deduction rises with income because tax rates rise with income.
Paul Gordon Hoffman calculated that if the interest rate set by the I.R.S. rises 1percentagee point and the donor takes a payout of 7percentt, or 1 percentage point higher, the value of the charitable deduction falls to 33.1percentt.
This will allow you to avoid paying capital gains taxes, while the value of the charitable deduction you claim will be higher.
