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Charitable Giving and The Tax Cuts Act Summary

AHP Staff
Published:  07/03/2018

Tax_ReformOn December 22, 2017, The Tax Cuts and Jobs Act (TCJA) was officially signed into law. Historically, The U.S. tax code has encouraged charitable giving by allowing individual taxpayers who itemize to deduct their charitable contributions, therefore receiving a tax break. However, with the enactment of the TCJA, the federal tax incentive for charitable giving has been significantly diminished.

The TCJA does not impose explicit limitations on charitable giving deductions, but with the increase in standard deduction along with deductions on key itemized deductions, the Act will likely decrease the number of taxpayers who itemize their charitable gifts. This potentially reduces the incentive for an individual to make a charitable donation. This tax provision has ultimately raised concerns for U.S. nonprofit organizations on whether the Act will negatively impact individual giving.

In AEI’s Economic Perspective article, Charitable Giving and The Tax Cuts Act, Alex Brill and Derrick Choe investigate the effects the TCJA will have on charitable giving in 2018. The authors discover that the new tax law could reduce individual giving by $17.2 billion or 4 percent, according to a static model. Their research shows a driving factor for the donation decline is due to an increased number of taxpayers now claiming the standard deduction. They go on to probe two policy options that could reverse the decline the TCJA sets forth: an above-the-line deduction and a tax credit.

Read the full article here.

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The Charitable Giving Coalition’s member organizations, including AHP, conducted a survey in July 2018 to gauge the initial effect of the Tax Cut and Jobs Act, passed by Congress in December 2017.

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