The Tax Cuts and Jobs Act (TCJA) will shrink the number of households claiming an itemized deduction for their gifts to nonprofits from about 37 million to about 16 million in 2018, Forbes reported. At the same time, the new law will reduce the federal income tax subsidy for charitable giving by one-third, from about $63 billion to roughly $42 billion. Overall, the TCJA will reduce the marginal tax benefit of giving to charity by more than one-quarter in 2018, raising the after-tax cost of donating by about 7 percent. The TCJA makes four big changes that are likely to discourage charitable giving. It lowers individual income tax rates, thus reducing the value of all tax deductions; and it caps the state and local tax deduction at $10,000 and increases the standard deduction to $12,000 for singles and $24,000 for couples — two steps that will significantly reduce the number of itemizers. The new law also roughly doubles the estate tax exemption to $22 million for couples, which will discourage tax-motivated bequests by some very wealthy households. However, that change is not included in TPC’s estimates.
