Philanthropy Isn’t Dead – An Update on Charitable Giving Post Tax ReformBy Magdalena M. Czerniawski | December 26, 2019
As the season of giving gets underway, individuals are motivated to help the needy, and many companies organize various holiday drives to support charities as well. With so many people and organizations eager to give during the holiday season, and all of the speculation about charitable giving that has occurred since the passing of the Tax Cuts and Jobs Act (TCJA) in 2017, some may be wondering about the true impact of the 2017 tax reform on their charitable contributions. Now that enough time has passed, we are able to measure the impact that the tax law has had on charitable giving.
The tax reform increased the cash charitable contribution deduction to most public charities to 60% of adjusted gross income for individuals. Most consider this a positive change. However, the reform also increased the standard itemized deduction—from $6,350 to $12,000 for single individuals and to $24,000 for joint filers. As a result, many individuals who previously itemized are taking the benefits of the increased standard deduction, and the charitable contribution deductions which were previously available to them are no longer offered. Studies suggest that the number of itemizers dropped by about 20–25 million.
Last year, the statistics showed increased giving in 2017, a positive development that many felt was due to the change in the tax law that became effective in 2018. Therefore, the question becomes: what is the real effect of the tax law change, one year later? According to Giving USA, Americans gave $427.71 billion to charities in 2018. Total charitable giving rose by 0.7% in comparison to the total raised in 2017 of $424.74 billion. However, after adjusting for inflation, total giving actually declined by 1.7%.
The change in tax law hurt middle-income individuals the most. They were the most affected by the change in the standardized deduction. In addition, the volatile stock market didn’t help charitable giving. Giving by individuals declined by 1.1% in 2018, with inflation adjustment amounts to a 3.4% decline. On the other hand, giving by foundations hit an all-time high, reaching $75.86 billion—the highest-ever dollar amount raised. This was a 7.3% increase, which even after adjustment for inflation amounted to 4.7%, representing 18% of total giving. Lastly, giving by corporations grew by 5.4%, which when adjusted for inflation represented an increase of 2.9%.
Although it may be too early to tell, this is positive news based on what we’ve seen in the past year. Tax law aside, Americans give for a variety of reasons—not just the tax benefits—and the significant increases in some categories tell us that philanthropy isn’t dead. As we near year-end, and with the holidays upon us, organizations should continue to follow through on their fundraising campaigns. There is still time and a willingness of the American public to support the causes they care about.
About Magdalena M. Czerniawski
Magdalena M. Czerniawski, CPA, MBA, is a Partner at Marks Paneth LLP and a member of the firm’s Nonprofit, Government & Healthcare Group. With over 15 years of nonprofit industry experience, she provides tax services to a wide array of nonprofits, including charitable organizations, schools, social welfare organizations, professional associations and private foundations. In addition to providing tax planning and advisory services, Ms. Czerniawski specializes in matters related to ASC 740-10 (FIN 48), the reporting... READ MORE +