Key Points

• This report examines the effect of itemized charitable giving, as tracked by the IRS, following the enactment of the Tax Cuts and Jobs Act of 2017.
• It finds that such giving, measured as a percentage of adjusted gross income, decreased overall because far fewer households itemized their tax returns.
• As a result, only the most affluent taxpayers, who continued to itemize their tax returns, retained a tax incentive for charitable giving.

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The Tax Cuts and Jobs Act (TCJA) of 2017 included some of the most far-reaching changes to the US income tax code in a generation. In addition to reducing statutory tax rates for individuals and corporations, the law adjusted the tax base. Among its most significant changes to the individual tax code, the TCJA reduced the value of two widely claimed itemized deductions—state and local taxes (SALT) and mortgage interest—while preserving and enhancing the itemized deduction for charitable contributions. At the same time, by nearly doubling the standard deduction, it sharply increased the percentage of tax-filing households choosing not to itemize deductions.

This report explores the net effects of these changes on itemized deductions for charitable giving. Charitable giving overall includes donations by foundations and corporations, but our focus is on individual households. The report uses national- and state-level IRS data from before and after the TCJA to review the combined impact on charitable giving of three policy changes: the increase in the standard deduction, limits on what had previously been the most commonly claimed itemized deductions (specifically, SALT), and the continued availability of a generous tax deduction for charitable giving. It examines, further, whether various income groups have changed their itemized charitable giving and discusses possible explanations. With most provisions of the TCJA set to expire in 2025, the report concludes by discussing whether and how a revised tax code should encourage a rebound in charitable giving among individuals.

Note that the IRS data on which we rely account for only itemized donations and do not include all donations, many of which are made by households that do not itemize their tax returns. Nevertheless, recent survey research indicates that overall charitable giving, not just itemized donations, is also declining.¹

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Notes

1. Indiana University Indianapolis, Lilly Family School of Philanthropy, “Giving USA: Total US Charitable Giving Declined in 2022 to $499.33 Billion Following Two Years of Record Generosity,” press release, June 20, 2023, https://philanthropy.indianapolis.iu.edu/news-events/news/_news/2023/giving-usa-total-us-charitable-giving-declined-in-2022-to-49933-billionfollowing-two-years-of-record-generosity.html.