The recently passed Tax Cuts and Jobs Act (affecting 2018 taxes) will help most middle-class wage earners keep more of their hard-earned dollars. It would be nice to celebrate this tax cut, but those who oppose the law are trying to take the fun out of it with their premonitions of significant drops in charitable giving.
That’s because the standard deduction has doubled to $12,000 for an individual and $24,000 for a married couple. Those are big numbers. Fewer will meet the threshold of $12,000-$24,000 in deductions—such as charitable donations—that bumps them into itemization. Instead, the better deal for this group will be to take the standard deduction.
And so, fewer will itemize.
But the rhetoric surrounding this issue tries to make you believe that charitable giving is the same as itemization of giving. It’s not.
Charitable donations will still happen, whether or not they’re itemized at the end of the year. Potential itemization is not the first or most important thought of donors when they’re considering whether or not to make a contribution.
According to a 2106 Gallup poll, “Donors invest money and effort in charitable organizations when they feel a strong emotional or psychological connection to them.” Also, a 2016 Holiday Giving Survey by World Vision reports that, “Roughly half of Americans (52 percent) would choose to donate to charities that support a cause they are passionate about, and more than one-third (35 percent) say they would choose a charity they have a personal connection to.”
Without surveys and polls, we know this makes sense when we think about where we send our charitable donations. Perhaps believing that no child should go hungry prompts you to donate to the Northeast Iowa Food Bank. Or, maybe the spirit of doing “the wave” at an Iowa football game propelled you to make a financial contribution to the University of Iowa Stead Family Children’s Hospital.
On the flip side, there may be nonprofits that would never receive your donation dollars—no matter how great the itemization reward. If you’re not a fan of the National Rifle Association or Planned Parenthood, benefits of itemization wouldn’t be enough for you to write the check.
It’s the heart muscle that gets used when donating. It pumps successfully whether using the standard deduction or the itemization process.
Charitable giving depends upon three things. First, citizens must have a disposable income strong enough in order to be able to give. The new tax law helps with that, by allowing individuals and married couples to keep more of the money they earn. Secondly, there must be a strong emotional connection to a cause. There are tens of thousands of worthy nonprofits in the state of Iowa. Pick one. Or two, or four, or more. Lastly, the donor must feel confident that donation dollars are being used wisely by the nonprofit. A 2015 poll conducted by the Chronicle of Philanthropy states, “When asked about factors that influence their giving, the biggest portion, 68 percent, said it is very important that the charity has evidence that its programs are effective.”
Instead of worrying about the itemization detail, nonprofits should focus their attention on successfully addressing a need that people in the community care about and then being transparent in how donation dollars are spent.
Many people give, but not all need to itemize.
The recent tax cuts were a win for the middle class. Nonprofits can be happy for these taxpayers.