The End of Charitable Tax Deductions?

Americans are generous and charitable in nature – in fact, one in ten Americans even works for a nonprofit – but tax incentives are important to how much they give.  Research consistently shows that people are more generous when they are incentivized to do so through the tax code. Last year, Americans gave nearly $370 billion to charitable organizations, including about 100 million donations to local Goodwill organizations.

However, this may all change soon. The Administration’s recently released proposed budget does not specifically call for a limitation (cap or floor) on the charitable giving incentive. But, it could decimate giving and cut the number of Americans who can claim the charitable tax deduction. One proposal being floated by some Members of Congress would double the amount of the standard deduction for individuals.  This would unintentionally harm charitable giving as more people would take the standard deduction rather than itemize and would not be eligible to take the charitable deduction. This news is not ideal for nonprofits since they are already seeing an increase in the number of people that need assistance while facing a decline in public funding and government contracts.

In fact, a recent study conducted by the Indiana University (IU) Lilly Family School of Philanthropy shows that current tax reform proposals by lawmakers and the Administration would decrease charitable giving by an estimated $13.1 billion. These donations play a vital role in Goodwill’s ability to fulfill its mission.  For every $1 a donor receives in tax relief, the public typically receives $3 of benefit. No other tax provision creates the same level of positive impact.

As policymakers work to address the budget deficit and reform our tax system, we are urging Congress to protect charitable giving incentives for individuals and families for both cash and noncash contributions.  Goodwill is supportive of a universal charitable giving incentive for all taxpayers regardless of income and whether the individual itemizes. Learn more about the campaign sponsored by Independent Sector here: http://www.giving100.org/ . #Giving100 celebrates a century of the charitable deduction and the American tradition of building community, helping our neighbors, and supporting the causes we care about.