Tax Charitable Deduction No Matter What
During the pandemic, a new wrinkle in the tax code was created that allowed for charitable deductions from individuals’ taxes no matter how they filed. And a revolution was then born with efforts for reinstatement today.
Basically, prior to this temporary adjustment in the tax code during the pandemic, the only way you could take a deduction off of your taxes based on a charitable gift was if you itemized your tax return. Prior to 2017 and the massive changes to the tax code, it wasn't unusual for most people to itemize their deductions and not take the standard deduction for an individual or family—at least those who were most likely to make a gift to a charity. But the increases to standard deductions from 2017 going forward dramatically changed the way most people file their taxes. And thus, most could not take a charitable deduction based on what has become the norm of standard deductions overall.
But the universal charitable deduction would allow individuals who don't itemize to deduct up to $4,500 for individuals and $9,000 for joint filing.
Why is this important?
As has been stated many times here and in numerous other places, over the last twenty years we have lost more than 1/3 of the households even making a charitable gift to any nonprofit in any one calendar year. That's tens of millions of households. While there's no direct correlation between the changes in the tax code and the tremendous drop in households making a gift to charity, anything we can do to increase the probability of people being more generous, to me, is a positive.
Is this change going to guarantee an increase in philanthropy?
There are no guarantees. But as more and more nonprofits signal financial struggles, any way we can embrace and endorse the idea of charitable giving seems to be a positive. And while there would be a natural concern of rising deficits in the federal government, the amount of money we're talking about is a drop in the bucket. And thus, worthy of future conversation.
