President Trump and Congress have made reforming and simplifying the tax code a top priority. Recently, Republican leaders in the House and Senate released a Unified Framework for Fixing our Broken Tax Code, which will serve as a template for the Senate Finance and House Ways and Means Committees as they develop legislation.
The proposal would nearly double the standard deduction for tax payers which would result in more individuals or married taxpayers filing jointly to take the standard rather than itemize. Currently, only taxpayers that file itemized returns can take a deduction for donating to charity. According to a study from the Indiana University Lilly Family School of Philanthropy if this benefit remains limited to itemizers, tax reform could decrease charitable giving by up to $13 billion per year. However, if tax reform allows all taxpayers to claim the charitable deduction, charitable giving could increase by more than $4 billion per year, thus giving more nonprofits the resources needed to continue to support individuals, families, and communities.
What does this mean in plain English? Nonprofits could be hurt by this proposal. When you pay your taxes, most likely you or your accountant or electronic software does a calculation to determine if you’ll have more money in your pocket if you itemize or take a standard deduction. This is why you’re asked questions about owning a home, donating to charity, if you have children, etc. If the standard deduction is increased, more people will be taking that rather than listing each item they can deduct (in other words, itemize). If one doesn’t itemize, there isn’t an incentive to take the charitable deduction.
Donors play a vital role in the Goodwill® network’s ability to fulfill its mission. While the framework would retain the charitable contribution, it does not detail whether the deduction would be expanded. You can help us protect charitable giving by asking Congress to extend the charitable deduction to all taxpayers to encourage them to give even more in support of their communities.