After years of growth, many tax experts thought 2018 would show a decrease in charitable giving, especially among individuals who are part of the middle class. The expected decline in giving was attributed to the Tax Cuts and Jobs Act of 2017, which doubled the standard deduction while taking away many itemized deductions. These changes led many taxpayers, especially in the middle class, to opt-out of itemizing. Taxpayers who do not itemize, do not receive tax benefits for charitable gifts, leading to fewer donations. According to “Giving USA 2019,” this prediction held true for 2018.
With many taxpayers claiming the standard deduction, individual giving particularly was expected to decline from years past. “Giving USA 2019” shows a decline of 1.1% from 2017 to 2018, and the decline steepens to 3.4% when adjusting for inflation.
This should not come as a surprise, considering some individuals wanted to get ahead of the tax reform by choosing to donate more than normal in 2017. Tax reform, however, was not the sole cause of the decline in charitable giving. Another potential cause of the decline in charitable giving was likely the stock market. The market was doing well throughout 2018, yet took a bit of a downturn close to year-end. End-of-year giving was likely reduced by the market not doing as well as hoped for.
It will be interesting to see if the decline in charitable giving in 2018 was an anomaly or part of a trend. As always, please feel free to contact Schneider Downs if you or your organization has questions or needs assistance in developing charitable giving strategies.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.