The Issue

In addition to the existing itemized deduction, Congress created a $300 charitable deduction in March 2020 for cash donations made by those who do not itemize their taxes, sometimes referred to as a “universal charitable deduction.” In December 2020, this deduction was expanded to $600 for joint married filers and extended through 2021. 

According to data from the Fundraising Effectiveness Project, individual giving in 2020 increased by 10.6% from the previous year, with small donations increasing by 15.3%. On December 31, 2020, there was a 28% increase in donations of exactly $300, then the maximum amount allowed for nonitemizers. 

What’s at Risk 

While the 2017 tax law retained the charitable deduction, it made other structural changes to the tax code – like increasing the standard deduction and repealing personal exemptions – that eliminated this incentive to give for about 21 million taxpayers. While estimates vary, there is strong consensus from charitable research experts that this will decrease giving by billions of dollars per year. Over the past 15 years, the number of Americans who donate to charity dropped 11 percentage points. Without tax incentives, this alarming trend will accelerate. 

Expand the Charitable Deduction 

Every American should have an incentive to invest in their community by engaging in charitable giving, regardless of whether they itemize their taxes. This would allow charities to serve more people and make the tax code fairer. Independent Sector is working collectively with our partners and members to engage policymakers on this critical priority. 

Congress can help the nonprofit sector better serve the nation by enacting the Charitable Act (S. 566/H.R. 3435), led by a bipartisan, bicameral group of lawmakers. The legislation would raise the $300/$600 cap to roughly $4,600 for individuals/$9,200 for couples and extend the deduction through years 2023 and 2024.  

Modeling research shows that a proposal like S. 566/H.R. 3435 could generate $17 billion in additional giving per year if made permanent. According to Independent Sector polling, 77 percent of Americans support expanding the universal charitable deduction up to $4,000.