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Individual Charitable Donations Dropped in 2018. Is the 2017 Tax Cuts and Jobs Act to Blame?

In 2018, charitable giving by corporations and private charitable foundations increased generally, but individual Americans contributed less money to charities in 2018 than in the previous year—the first such decline since 2013. Individuals’ share of total charitable giving also dropped from 70% in 2017 to 68% in 2018.

More specifically, individual Americans donated more than $292 billion to charities in 2018, a 1.1% drop from 2017 (or a 3.4% drop when adjusted for inflation). Total charitable contributions—combining charitable giving by individuals, private foundations, corporations, and so on—rose by a modest 0.7% but actually declined 1.7% when adjusted for inflation.

These details are according to “How the tax overhaul contributed to a drop in charitable giving,” an article by Richard Eisenberg, which discusses data from Giving USA 2019: The Annual Report on Philanthropy for the Year 2018, data that at least seems to support previous predictions that the 2017 Tax Cuts and Jobs Act (TCJA) would cause a decline in individual giving overall. One of the main culprits, if Eisenberg and other analysts are correct, is that the TCJA’s doubling of the standard deduction for single and joint filers, which caused far fewer American taxpayers to itemize deductions on their federal tax returns, simply reduced the number of individual taxpayers willing to donate money to 501(c)(3) charitable organizations.

More generally, X. Frank Zhang, Professor of Accounting at Yale University, traces the decline in individual giving to two causes: the 2017 Tax Cuts and Jobs Act’s doubling of the standard deduction for single and joint filers, discussed above, and 2018’s poor stock market, noting that “Americans tend to donate less in bear markets than in bull markets,” even if the economy is fairly strong overall.

Whatever the case may be, we now have a helpful, if limited, snapshot in the Giving USA report of how the 2017 Tax Cuts and Jobs Act might have impacted the nonprofit sector in 2018, and we can see that the results are mixed. It’s still anyone’s guess if the 2017 tax reforms will ultimately have positive or negative effects on the nonprofit sector, so 501(c)(3) charities that rely heavily on individual donations should continue to keep a close eye on these developments through the remainder of 2019 and beyond.

Want to learn more about 501(c)(3) charitable organizations and related subjects? Check out the following articles from Northwest:

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