The Tax Cuts and Jobs Act, signed into law on December 22, 2017 raised the standard deduction from $12,700 for married couples filing jointly and $6,300 for singles to $24,000 for married couples and $18,000 for singles beginning in 2018. The standard deduction is a dollar amount that non-itemizing taxpayers may subtract from their income before federal income tax is applied. Raising the standard deduction was intended to help simplify the tax code by encouraging taxpayers not to itemize deductions. That is good for taxpayers, but it doesn’t bode well for non-profits in 2018.
Indications are that in 2018, because of the increase in the standard deduction, only 5% of taxpayers will itemize and be able to take advantage of the deduction for charitable donations. Compare that with 2017, when 33% of taxpayers took advantage of charitable deductions by itemizing. The total cost to non-profits nationwide is projected to be as much as $100 billion dollars.
There is some good news. On May 10th, Republican Representative Christopher Smith (R-NJ) and Democratic Representative Henry Cuellar (D-TX) introduced H.R. 5771 “…to amend the Internal Revenue Code of 1986 to allow the deduction for charitable contributions as an above-the-line deduction.” If the bill were to pass as originally written, donating to a charity could become more advantageous for taxpayers than ever before.
What can you do? A representative from the Arizona Communities Foundation, speaking at the Nonprofits Connections meetings this past Friday in Sedona, shared three strategies to help your non-profit mitigate the consequences of the new tax law. We’ll be sharing those ideas here over the next few days, so be sure to click the FOLLOW button on the right to be notified by email when a new article is posted.
In the meantime, let your elected representatives in both the house and the senate know that you support HR 5177 and what it means to you and to the non-profit(s) you represent.