The sweeping Republican tax bill signed into law by President Trump just before Christmas is expected to boost year-end giving to nonprofits, but the uptick is likely to fade in 2018 as the tax changes take effect, the Associated Press reports.
While the legislation does not eliminate or reduce the deductibility of charitable donations, it does nearly double the standard deduction used by two-thirds of American taxpayers to $12,000 for individuals and $24,000 for married couples. As a result, many moderate-income taxpayers who currently itemize deductions may find that it's no longer beneficial for them to do so, leading to a sharp reduction in small donations to mainstream charities.
For those who choose not to itemize under the new law, "their cost of giving goes up dramatically," said Patrick Rooney, a professor of economics and philanthropy and director of the Lilly Family School of Philanthropy at Indiana University. Indeed, Rooney predicts that charitable giving will decline by $14 billion in 2018, or 5 percent of the roughly $282 billion that U.S. charities received from individuals in 2016. "It will absolutely have a negative impact."
End-of-year giving is a different story, and charities should see a spike, said Steve Taylor, senior vice president and counsel for public policy at the United Way. "I think we'll have some increased donations [in 2017]." His organization, said Taylor, has already seen some "doubling up" by large donors over what they might have been expected to give. Still, a lot of "charities are in shock. Charities feel totally blindsided and like we have been thrown under the bus."
While that may be understandable, charities will have to get over their shock and take concrete steps in the new year to minimize any negative consequences of the legislation, said Marcus Owens, a partner at the law firm of Loeb & Loeb and former head of the IRS's exempt organizations division. "I think what it will do is cause charities to sharpen their fundraising efforts," he added. "They'll need more sophisticated fundraising techniques."