No one can know for sure how tax reform will impact charitable giving. But here is some context on the new law and considerations for churches and ministries.
The charitable contribution deduction was not directly eliminated or limited by tax reform. However, the near doubling of the standard deduction (now $24,000 for taxpayers Married Filing Jointly) means that significantly fewer Americans will be able to claim a charitable deduction because only those who itemize can claim the deduction. Also, the new lower tax rates starting in 2018 will mean less of a tax savings from giving by those who continue to itemize.
On the other hand, the reduction of the corporate tax rate will provide additional resources to every corporation that has taxable income. The changes in the individual tax rates will provide additional resources to many taxpayers. Where these additional resources are available because of tax reform, there is an opportunity to use some of these funds for charitable giving purposes.
Yes, a “universal” or above-the-deduction was suggested in tax reform negotiations but ultimately fell short. The universal deduction did not become law because it was seen as costing the government too much revenue in staying within the budget constraints Congress needed to pass tax reform.
Tax reform did include a provision to increase the adjusted gross income limit for cash contributions from 50% to 60%, still with a 5-year carryover.
Looking back on history, we can see from the last major tax reform effort in 1986 that when taxes were cut, average giving continued to trend upward in the years following despite predictions of a major downturn.
Finally, even though some may have less incentives to give under the new tax law, it’s still true that supporters to Christ-centered organizations are most motivated to give by the missions of churches and ministries and by what the Bible teaches about generosity. The tax benefits, while certainly helpful, are secondary to many givers in the faith community.
For more information on Tax Reform and its implications for churches and nonprofits, please consider attending one of the free, in-person National Forums on Tax Reform and/or watching our free Tax Reform Webinar-on-Demand.