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Tax Expenditures For Noncash Charitable Contributions

  • Ackerman, Deena
  • Auten, Gerald
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    This paper examines the itemized deduction for donations of property to charitable organizations, its benefits to charitable organizations and their beneficiaries, and the associated tax expenditures. In 2005, taxpayers deducted $48 billion in noncash donations, resulting in a tax expenditure of $9 billion. High-income taxpayers primarily donated stock and other appreciated property, thereby also avoiding the capital gains tax liability due on appreciation of the assets had they been sold, while middle-income taxpayers primarily donated used clothing and household items. We focus on donations of vehicles using tax and online vehicle auction data. Taxpayer valuations are compared with auction prices of vehicles of the same make, model, and year. The results imply that either taxpayers are overstating the likely value of their vehicle or donating vehicles of higher average quality than those sold in online auctions. Donations of vehicles and vehicle valuations declined substantially after tax reforms were enacted in 2004.

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    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 64 (2011)
    Issue (Month): 2 (June)
    Pages: 651-87

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    Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:651-87
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    1. Bakija, Jon & Heim, Bradley T., 2011. "How Does Charitable Giving Respond To Incentives And Income? New Estimates From Panel Data," National Tax Journal, National Tax Association, vol. 64(2), pages 615-50, June.
    2. Ackerman, Deena & Auten, Gerald, 2006. "Floors, Ceilings, and Opening the Door for a Non–Itemizer Deduction," National Tax Journal, National Tax Association, vol. 59(3), pages 509-30, September.
    3. Gerald E. Auten & Holger Sieg & Charles T. Clotfelter, 2002. "Charitable Giving, Income, and Taxes: An Analysis of Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 371-382, March.
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