Universal Charitable Deduction
Since 1917, the federal charitable tax deduction has provided a tax deduction for donations made to nonprofit organizations by taxpayers who itemize their tax returns. The 2017 Tax Cuts and Jobs Act made several changes that hurt the effectiveness of the charitable deduction. By increasing the standard deduction, it greatly reduced the number of taxpayers who itemize and therefore have access to the charitable deduction. Under current law, more than 90% of taxpayers don’t itemize, meaning less than 10% of taxpayers have a tax incentive to increase their donations to important causes.
In March 2020, Congress enacted a $300 charitable deduction for cash gifts from nonitemizers for 2020 and in December 2020 extended its availability through 2021 and increased the cap to $600 for joint filers. Thereafter, the number of small gifts – especially those of $300 and $600 – saw a significant increase before collapsing once the deduction expired at the end of 2021.
Current Legislation - 118th Congress
The Charitable Act would restore the non-itemizer charitable deduction to one-third of the standard deduction. In 2023, this change would allow taxpayers who don’t itemize to claim a deduction for charitable giving up to approximately $4,600 for individuals/$9,200 for joint filers, in addition to claiming the standard deduction itself. The deduction in the bill would be in effect for taxable years 2023 and 2024 and indexed for inflation.
On May 17, 2023, Representatives Blake Moore (R-UT), Danny K. Davis (D-IL), Michelle Steel (R-CA), and Chris Pappas (D-NH) introduced the Charitable Act in the House. The bill (H.R.3435) is a companion to the Senate version.
- Charitable giving works and is good tax policy. For 2020, more than 25% of all non-itemizers claimed the special $300 deduction or 42.5 million more taxpayers participated. That temporary small non-itemizer generated $10.9 billion in charitable giving that year.
- Charitable dollars are essential to maintaining a healthy civil society, vital to both nonprofit charities and local governments that depend on these resources to achieve their critical missions. The charitable deduction is good tax policy – a simple calculation shows that those in need receive at least $2.50 in benefit for every $1 of tax benefit. This is an impressive return on investment.
- Small charitable gifts increased after the enactment of the temporary universal charitable deduction. In March 2020, Congress enacted a $300 charitable deduction for cash gifts from nonitemizers for 2020 and in December 2020 extended its availability through 2021 and increased the cap to $600 for joint filers. Thereafter, the amount of small gifts – especially those of $300 and $600 – saw a significant increase.
- AFP’s Fundraising Effectiveness Project found that gifts of $300, the exact amount of the previous universal charitable deduction for individuals, rose in both 2020 and 2021 (by roughly 7.5% each year) when the deduction was available. In addition, when looking specifically at the last day of each year (typically the busiest day for charitable giving), gifts of exactly $300 rose by 33% in 2020 and then another 7% in 2021, when compared to 2019.
- And since the temporary deduction expired, giving dropped 10.5 percent after adjusting for inflation in 2022, only the fourth time that donations have fallen since 1956, according to Giving USA. The same report found charitable giving as a share of personal disposable income dropped to 1.7 percent – a near 30-year low.
- The Charitable Act will incentivize millions of more Americans to give and support their communities.
- Include personal anecdotes and data from your members: Collect data and stories from your members about how the decrease in donors and in donations has negatively impacted their work and the communities that they serve.