Summary: The CARES Act establishes a new, temporary charitable deduction (limited to $300) in tax year 2020 for taxpayers who claim the standard deduction. PWBM projects that this provision would cost about $2 billion and would have little effect on total donations. More than half (53 percent) of the benefit would accrue to families in the 60th to 90th percentiles of the income distribution.
Table 1: Distribution of Federal Tax Change, Calendar Year 2020
| Income group | Average tax change | Tax units with a tax cut | Percent change in after-tax income | Share of tax change | Share of federal taxes paid | ||
|---|---|---|---|---|---|---|---|
| Share with tax cut | Average tax cut | Under current law | Under the proposal | ||||
| Bottom quintile | $0 | 0.4% | -$25 | 0.0% | 0.2% | 0.1% | 0.1% |
| Second quintile | -$5 | 21.6% | -$30 | 0.0% | 9.6% | 2.3% | 2.3% |
| Middle quintile | -$15 | 40.9% | -$40 | 0.0% | 22.0% | 10.3% | 10.3% |
| Fourth quintile | -$30 | 58.9% | -$50 | 0.0% | 34.2% | 19.1% | 19.1% |
| 80-90% | -$40 | 59.7% | -$65 | 0.0% | 19.1% | 14.9% | 14.9% |
| 90-95% | -$35 | 49.1% | -$70 | 0.0% | 8.0% | 11.0% | 11.0% |
| 95-99% | -$30 | 37.5% | -$80 | 0.0% | 5.8% | 16.3% | 16.3% |
| 99-99.9% | -$25 | 24.2% | -$105 | 0.0% | 1.0% | 12.7% | 12.7% |
| Top 0.1% | -$15 | 14.7% | -$110 | 0.0% | 0.1% | 13.1% | 13.1% |
Note: “Income” is defined as AGI plus: above-the-line deductions, nontaxable interest income, nontaxable Social Security benefits, nontaxable pensions and annuities, employer-side payroll taxes, and corporate liability.