June 10, 2019

The Impact of the TCJA on Charitable Organizations

By Laura Farrell, Staff Accountant, Tax & Business Services

Related Services Tax & Business, Personal Financial Management, Family Wealth Services, Cost Recovery & Accounting Methods, Tax Return Compliance

Related Industry Nonprofit & Social Sector

The Impact of the TCJA on Charitable Organizations Tax & Business

The Tax Cuts and Jobs Act (TCJA) of 2017 had a significant impact on the 2018 filing year for both individuals and entities. Charitable organizations, specifically, may have been, and may continue to be, adversely affected by the new law.

As a result of the TCJA, it has become more beneficial for many more individuals to take the standard deduction. Many individuals donate to charities not only because the mission of the charity is important to them, but also for the tax incentive. The TCJA reduced tax incentives for a large number of individual taxpayers by nearly doubling the standard deduction from $6,350 (2017) to $12,000 (2018) for single filers and $12,700 (2017) to $24,000 (2018) for joint filers. Additionally, the changes to itemized deductions – such as capping the federal deduction for state and local and real estate taxes to a total of $10,000 – further reduced the benefit of itemizing.

In the past, donating to various 501c(3) organizations would aid individual taxpayers by affording them the opportunity to take larger deductions on their federal tax returns. The increase in the standard deduction as well as new limitations on certain itemized deductions have increased the number of individuals who are taking the standard deduction. It is presumed that those who benefit from taking the standard deduction, as opposed to itemizing, are less likely to donate to charitable organizations.

As tax year 2018 was the first filing season under the new law, it is unclear how severe the impact has been on charities. Many sources are predicting that charities may see a substantial difference when individuals start filing their 2019 returns as individuals become more familiar with potential changes due to new law.

Your Marcum tax professional can help you determine various charitable alternatives to help you, your business and family achieve your philanthropic goals.