How the New Standard Deduction Will Change Our Charitable Giving

Photo credit: John Liu, CC BY 2.0.

My partner and I both grew up in religious households where the goal was to give 10 percent of our income to charity. I was raised to think that, regardless of how much we made, learning to live on 90 percent (or less) of our income was a valuable pursuit, and it was a way to put your money where your mouth was, in terms of religious belief. Many more people talked about religion than gave money to help the charitable initiatives of the church, so there was a motivation to be in that “elite” tithing circle.

Over the years, I’ve lost some of that motivation: for one thing, I don’t see giving 10 percent to a religious institution as quite as important. Instead, I want to be the kind of person who avoids wasting money on unnecessary luxuries so I can donates to worthy causes. I try to keep up with the organizations that do well on charity monitoring websites, but I also keep my ear to the ground about organizations in my community that are doing a lot of good with their shoestring budgets. I don’t want my name on anyone’s plaque, but I do love seeing our scrappy Rust Belt town grow stronger because my partner and I can afford to reinvest in small non-profits.

I also appreciated the annual tax deduction. My income has risen precipitously in the years since completing graduate school, and one way to take the sting off of those bigger tax bills was to donate to charity. I liked that I could control where my money went and know that I was giving it to organizations that did good works. I was maximizing my financial impact: a reduced tax bill effectively allowed me a higher purchasing power, even if much of what I was purchasing was investment in charities.

This may change with the new standard deduction: $12,000 for individuals and $24,000 for married couples. I actually don’t mind a higher standard deduction; the idea of saving some of the tax-prep headache (on my end) and verification headache (on the IRS’s end) sounds great. However, I worried when I started reading articles claiming that this new deduction is likely to cause middle-income Americans to donate something like $14 billion less to charity each year. With a higher standard deduction, families don’t need to donate as much to get the same tax benefits. 

When my partner and I got a $12,700 standard deduction, it made sense to itemize and reduce our tax burden — but we don’t know how we could possibly generate more than $24,000 in deductions this year. We’d have to max out our retirement in a different way than we currently do (a mix of Roth and traditional IRAs), fully fund our HSAs, and donate twice as much money. Those are a lot of changes that I’m not sure we can swing.

I really worry about non-profit organizations, especially if their yearly budgets are dependent on people like me feeling that addictive feeling of “generating tax refunds.” That is why my husband and I have decided that we’re not going to reduce our charitable deductions this year; we’ll continue our goal of donating at least 10 percent of our net income to the various worthy non-profits we support. Because we both anticipate earning a little more this year than last, we expect to donate more than 10 percent this year. While next year’s tax bill probably won’t be affected by these donations due to the higher standard deduction, I value donating beyond the tax benefits.

I cannot envision a world in which my husband and I will ever “break the standard deduction” again, but I don’t love the process of itemizing anyway. Rather than letting my charitable donations be tied to my taxes, I’m pretty happy with creating a rule that fits for us, to ensure we actually get the donations done (our good intentions often aren’t enough). In return, I hope that non-profits will receive enough money to keep their doors open after some of the incentive to give has been reduced.

Laura Marie is a writer and teacher in Ohio. Read more of her work at Messy Mapmaker.

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