Will Tax Incentives Be Restored?

The new tax reform laws that were passed December 2017 essentially got rid of the tax incentive to give to charity, at least for the majority of middle- and low-income givers. Because of the new tax law, Forbes has estimated that charitable giving this year will decrease by $12 to $19 billion.[1]

However, laws are in the works to turn this around. Last fall, Rep. Mark Walker (North Carolina)  and Sen. James Lankford (Oklahoma) introduced a new bill, the Universal Charitable Giving Act, and it is gaining steam.

The way the current law stands, only taxpayers who itemize their deductions have any tax incentives to give to charity. However, if the Universal Charitable Giving Act passes, every taxpayer will have an incentive to give to charity. This new law may be charities’ saving grace.

If passed, the Universal Charitable Giving Act will allow tax payers who do not itemize their deductions to still claim a charitable deduction. On top of claiming the standard deduction, tax payers will be able to also claim their gifts to charity as deductions, up to an additional one-third of the standard deduction. For example, if an individual tax payer chooses not to itemize, they could still claim the $12,000 standard deduction, and then claim additional deductions on top of that, up to an extra $4,000 (one-third of the standard deduction).

Lawmakers in support are hoping that the Universal Charitable Giving Act will restore the average American’s tax incentive to give to charity. Currently the bill has bipartisan support in the House from 14 Republicans and 6 Democrats.

 

[1]Howard Gleckman, “21 Million Taxpayers Will Stop Taking Charitable Deductions Under the New Tax Law,” Forbes, Jan. 11, 2018