For the past 100 years, the charitable deduction has encouraged individuals to make significant, transformational gifts to educational institutions. A study by Indiana University Lilly Family School of Philanthropy found that the percentage of Americans who give to charity has fallen by 11 percent over the past 14 years—from 67 percent in 2002 to 56 percent in 2014. Under the Tax Cuts and Jobs Act of 2017, approximately 90 percent of Americans, particularly middle and low income taxpayers, are not incentivized to give more because they do not itemize their tax returns and therefore cannot deduct their charitable donations.
A universal charitable deduction will allow all taxpayers, regardless of their income, to deduct charitable gifts and will also help educational institutions continue raising the funds they need to achieve their critical missions.
Click here for a snapshot of how giving supports higher education in the U.S.
Legislation and Policy Issues on the Charitable Deduction
Charitable Giving is Changing
The Tax Cuts and Jobs Act of 2017:
- Lowered top individual rate from 39.6 percent to 37 percent. The top bracket will apply to individuals with incomes over $500,000 for individuals, $600,000 for married couples.
- Doubled the standard deduction threshold to $12,000 for individuals and $24,000 for married couples and does not include a universal charitable deduction proposal. This means that roughly 11 percent of American taxpayers (those projected to itemize under the plan) will benefit from the charitable deduction.
- Allows taxpayers to deduct cash contributed to public charities like colleges, universities and independent schools up to 60 percent of his or her Adjusted Gross Income per tax year, up from 50 percent under current law. The previous limit of 30 percent of AGI for capital gain property remains unchanged.
- Repealed the overall limitation on itemized deductions (Pease limitation).
- Repealed the special rule that allows taxpayers to deduct 80 percent of a charitable gift made for the right to purchase tickets for college and university athletic events.
Impact on Educational Institutions
The bill significantly reduced the number of taxpayers who itemize their tax returns (from roughly 30 percent of taxpayers to about 11 percent), effectively eliminating the charitable deduction for 89 percent of Americans. This decrease in eligible taxpayers will accelerate an already troubling philanthropic trend. Consequentially, the Tax Cuts and Jobs Act law will increase the cost of giving for donors to educational institutions, particularly donors who give current gifts to the institution's annual fund.
Charitable donations help colleges, universities and independent schools achieve their teaching, research and public service missions. As federal and state governments continue to cut funding for higher education, raising private support from individuals has become even more crucial for colleges and universities.
Educational institutions and those we serve can't afford to wait and see how this will impact their funding for financial aid, critical research, and teaching.
CASE supports preserving the full value of the charitable deduction and the enactment of a universal charitable deduction. As such, CASE supports the Charitable Giving Tax Deduction Act (H.R. 651) introduced by Representatives Chris Smith (R-NJ) and Henry Cuellar (D-TX).
- College Admissions Fairness Act (S. 1732)
- Values-Based Messaging on Giving Policy, Independent Sector and TargetPoint Consulting, May 2019
- H.R. 1260
- Charitable Giving Tax Deduction Act (H.R. 651)
- Charitable Giving Coalition
- Charitable Giving and the Tax Cuts and Jobs Act, American Enterprise Institute, June 2018
- The House Tax Bill is Not Very Charitable to Nonprofits, Tax Policy Center, November 2017
- Tax Policy and Charitable Giving Results, Independent Sector, May 2017
- Advocacy and Communications Toolkit: Expanding the Charitable Deduction, Independent Sector, May 2017
- The New Debate over a Charitable Deduction for Nonitemizers, Urban Institute, October 2016
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