Because I no longer have mortgage interest as a deduction, it actually was better for me to take the standard deduction. My charitable contributions were no longer deductible even though it was many thousands of dollars. I am frankly worried about how this will Impact nonprofits moving forward. Grumpy thoughts?
It should discourage charitable giving because there will be fewer taxpayers who will find it in their interest to itemize, and also with marginal tax rates down etc. the savings for people who itemize will also be lower. If you’re getting 25 cents back instead of 33 cents, for example, you might be less likely to donate.
I’m not a tax economist, but there are actual tax economists who have predictions, including this article from the Urban Institute/Brookings tax center that has estimates.
There are a few complications of course. Fears of the future, beliefs about what the government is or isn’t funding compared to what needs funding, and just how the economy is doing will all effect giving, even in the absence of the tax cuts and job act. Additionally, the increase in donor advised funds has made it more beneficial to put money in the fund all at once to get a tax break and then to hold onto it before disbursing as it gains money. It made sense for a lot of people who were going to be losing their mortgage deductions to put money in DAF before the tax law went into effect. I don’t know if that actually happened though. I assume sometime in the next year or two academic economists will be trying to sort this all out.
I’ve certainly increased my charitable (and political) donations because of Trump, but definitely not because of any changes to the tax code– all of our donations are going in without any tax breaks. Which does make it easier to donate to places that aren’t tax-exempt (political non-profits, for example).