We’re about to come into the most significant time of year for charitable giving in the US. And one of the questions that I’ve been asked more than once, as the president of a global agency specializing in marketing and fundraising and chair of the Giving USA Foundation, is whether the Tax Cuts and Jobs Act of 2017 will have an impact on giving this holiday season.
To refresh your memory, a part of the tax reform act of 2017 was to nearly double the standard deduction for individuals (to $12,000) and for couples filing jointly (to $24,000). With such a high standard deduction, the concerns are that taxpayers will choose the standard deduction rather than itemize deductions since the standard deduction will be more advantageous.
This would thus eliminate the power of the charitable tax deduction for those who chose the standard deduction and, as a result, would mean fewer donations or smaller donations.
So, will tax reform impact holiday giving this year? It’s a great question. So, we commissioned a study of donors with our trusted partner, Campbell Rinker, to determine the answer. What we found was pretty fascinating.
• The Tax Cuts and Jobs Act will impact giving very little this year.
• A very small percentage said they would give less. Only 8 percent of all donors surveyed and 11 percent of those who itemize their charitable contributions said they would give less because of the Act.
• Yet some said they would give more. Ten percent of those who always itemize and 20 percent of those who sometimes itemize their donations said they would likely give more because of tax reform.
• The majority said they would give the same. Then there was the mass of donors in the middle with 64 percent of individuals who always itemize donations and 58 percent of those who sometimes itemize donations saying the change will not impact their giving.
• The overwhelming majority don’t know or misunderstand how tax reform will impact the charitable deduction.
• Half (50 percent) of respondents indicated they do not know how tax reform will impact their deduction for charitable giving. And nearly 3 in 10 wrongly believed they could still either deduct their donations as before or get a higher deduction.
The bottom line for this year’s holiday giving season is, I think, pretty clear: The vast majority of donors either don’t understand the implications of tax reform on the charitable tax deduction or they misunderstand it. So, their giving this holiday season shouldn’t be negatively impacted by tax reform.
However, things could change as taxpayers prepare their returns in 2019 and begin to see that itemizing their deductions is no longer advantageous. Once they come to that understanding, it could mean a downturn in charitable giving as the incentive to give more is removed. But at this point, that is pure conjecture. Only time will tell.
For now, I think it’s fair to say that this year’s holiday giving should be full of cheer.
Rick Dunham is the CEO of Dunham+Company, which consults with nonprofits on their fundraising and marketing needs, and Chair of the Giving USA Foundation.
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