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Charitable Contributions – The Effects of the Tax Cuts and Jobs Act of 2017

Almost a year ago, I wrote an article discussing the changes the Tax Cuts and Jobs Act of 2017 made to the deduction for charitable contributions starting for tax year 2018. In early 2019, while giving a brief presentation to a local fundraising professional’s organization on the charitable contribution changes, I was asked what changes we were seeing with the charitable contributions our clients were making in light of the new tax law. Their concern, which was echoed by many charitable organizations and fundraising professionals nationwide, was that charitable contributions might decrease as a result of the new tax law. Unfortunately at that time, it was still too early to tell as we did not have the information necessary to determine those amounts for 2018.

Now that the dust has settled from the 2018 tax year extended filing season, I seem to have an answer to that question. To obtain the answer, I extracted charitable giving information from our tax software. What I found, at least for our clients that we have charitable contribution information for, was that the changes enacted under the new tax law did in fact result in an overall decrease in giving from 2017 to 2018.

Our data indicated that the average charitable contribution per individual decreased by roughly 3.7% from 2017 to 2018. Further, our results indicated that the average individual contribution per $1,000 of Adjusted Gross Income decreased from 2017 to 2018 by roughly $2.78. Finally, the percentage of individual taxpayers making charitable contributions also decreased, from 72% in 2017 to 68% in 2018.

Please note that the above figures do not include charitable contributions for clients who did not provide us with their charitable contribution information, including clients who may not have significant itemized deductions and claims the standard deduction. It would also not include contributions from taxpayers age 70 ½ or older who contributed via a qualified charitable deduction from a traditional IRA.

These findings are similar to the overall results nationwide. According to Giving USA 2019: The Annual Report on Philanthropy for the Year 2018, total giving by individuals decreased by 1.1% in 2018 compared to 2017 (3.4% decrease when adjusted for inflation). The report also indicated that charitable giving by individuals decreased as a percentage of total giving in 2018 to 68%, down from 70% in 2017.

While it may still be too soon to see what effects the new tax law has on charitable giving in the long term, for the short term it seems that individuals have been slightly more hesitant to make charitable gifts based on the changes in the new tax law. Given that, it is now more important than ever for taxpayers to understand the changes made to charitable contribution deductions under the new tax law and the strategies they can employ to help maximize their contributions. For those wondering what the changes entailed and some of the strategies they can employ to maximize their deductions, please see my prior article on this very topic which can be found here.

If you still have questions, or would like to see how the changes or strategies could affect you personally, please contact YHB to discuss further.

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About the Author

Derek McCarty began his career in accounting with Yount, Hyde & Barbour in 2011 after a graduating with a B.S. in accounting from Shepherd University.  Derek became a licensed CPA in 2013. As a member of the firm’s Family Legacy Services team, Derek has developed an in-depth understanding of individual, trust, estate and business taxation. Derek stays up-to-date with the latest trends and regulations, regularly attending courses specifically designed towards matters affecting his clients.  Derek also assists with providing tax training and ongoing mentoring to YHB staff members.