Universal Charitable Deduction

The Charitable Deduction Works

• Generous Americans have given more than $400 billion annually for the past 10 years. Charitable dollars are essential to maintaining a healthy civil society, vital to both nonprofit charities and local governments that depend on these resources to achieve their critical
• The charitable deduction is good tax policy – it encourages individuals to give away more of their income, devoting it to their community’s needs rather than their own. A simple calculation shows that those in need receive $2.50 in benefit for every $1 of tax benefit. This is an impressive return on investment.

• In March 2020, Congress enacted a $300 charitable deduction for cash gifts from nonitemizers for 2020. Since then, the amount of charitable giving – especially of gifts less than the $300 cap – has seen a significant increase.
• According to data from the Fundraising Effectiveness Project (FEP), individual giving in 2020 increased 7.3 percent, compared to 2019, and the number of donors increased by 10.6 percent.
• The FEP report also shows a 15.3 percent uptick in donations of less than $250, which outpaced the increase in larger donations. Additionally, there was a 28 percent increase in gifts of $300 on December 31st—the exact amount of the current universal charitable deduction. While we know there are many factors that contribute to increased donations, one contributing factor is likely the availability of the charitable deduction to nonitemizers.

Congress Should Enact the Universal Giving Pandemic Response and Recovery Act (S. 618, H.R. 1704) 

• In December, Congress extended the universal charitable deduction availability through 2021 and increased the cap to $600 for joint filers. We are grateful for this change, but Congress can do more to make giving incentives fair for all taxpayers and to strengthen and expand this incentive. This will help charitable organizations achieve their missions and support their workforces and communities as our nation recovers from the current and future crises.
• The Center for Civil Society Studies at John Hopkins University estimates around 930,000 jobs – 7.3 percent of the charitable sector workforce – were lost in 2020, underscoring how difficult the year was for the philanthropic sector.
• Congress can help alleviate some of the difficulties the sector is facing by enacting the Universal Giving Pandemic Response and Recovery Act led by a bipartisan, bicameral group of lawmakers, including Sens. James Lankford (R-OK), Chris Coons (D-DE), Mike Lee (R-UT), Jeanne Shaheen (D-NH), Tim Scott (R-SC), Amy Klobuchar (D-MN), Susan Collins (R-ME), Catherine Cortez Masto (D-NV) and Reps. Chris Pappas (D-NH) and Jackie Walorski (R-IN). The legislation would raise the $300/$600 cap to roughly $4,000 for individuals/$8,000 for couples, extend the availability of the deduction to the 2022 tax year and eliminate the current exclusion of gifts to donor-advised funds, helping to spur even more giving as communities continue to fight and recover from COVID-19 and its economic effects.
• This legislation will democratize giving by further incentivizing all American taxpayers—regardless of their income—to give to charity, thereby ensuring that our country retains a strong and independent civil society. And it will provide needed resources for charitable and faith-based organizations to continue providing vital services to families, workers, and communities, especially those critically impacted by the ongoing pandemic.

Click here to download the CGC Universal Charitable Deduction One-Pager