Tis’ the season of giving and many on the heels of Giving Tuesday, people will be making contributions to their favorite charities. But did you know that the Tax Cuts and Jobs Act that went into effect this year could negatively impact those very nonprofits, including local Goodwill® organizations?
The tax reform bill passed by Congress nearly doubled the standard deduction for tax payers which will 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. 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 law, but we aren’t likely to see the impact until after people file their taxes by April 15th. Donors may change their giving patterns going forward. 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 to provide job training and important job placement opportunities to help people find jobs, earn paychecks and build their skills. If you chose to contribute to a charity during this holiday season and when you receive a receipt that documents your gift, think about the implications that tax reform can have on nonprofits and the people they serve in your communities. Consider giving you voice during this season, and stand ready to take action to support nonprofits by following us at @GoodwillCapHill and registering for our Legislative Action Center today.