Because we advise our clients (including foundations) on philanthropic giving, we monitor trends in charitable giving quite closely. In June, the report Giving USA 2019 noted that there was a slight increase (0.7%) in charitable giving during 2018, to roughly $428 billion. But if you look closely at donor types, there was a drop in giving by private citizens, who comprise the bulk of charitable giving in the US — historically, 70% or more.
Individuals and families gave 1.1% less to charities in 2018 (a total of $292 billion), despite the relatively strong economy. Meanwhile, giving by corporations increased by 5.4% and by foundations 7.3%.
We are not surprised by these results. Tax deductions are not the main reason people usually give to charities, but they are a factor. And the 2017 Tax Act has quite a few elements that can impact charitable giving. For one, the standard deduction doubled starting in 2018 (to roughly $12,000 for individuals and $24,000 for married couples filing jointly). As a result, fewer Americans have cause to claim itemized deductions, including charitable contributions. In any one year, many families are finding it more beneficial to claim the standard deduction, especially since the property tax deduction was capped at $10,000 annually. Also, the federal estate tax exclusion was doubled to roughly $11.2 million per person, at least until the end of 2025, providing less incentive for some to give away wealth during their lifetime.
It’s possible that the 2018 drop in charitable giving could be temporary. As we have been advising clients, it can be more beneficial under the current tax law to bunch charitable contributions into a single year so that your itemized deductions for that year are higher than the standard deduction. That giving can go directly to individual charities or to a Donor-Advised Fund (DAF), where assets given away can be held until you determine which charities you want to support.
As people apply new giving strategies to adapt to the 2017 Tax Act, perhaps we will see charitable giving become more volatile — down one year and up the next. Time will tell. In the meantime, charitable giving that is part of a well-structured estate plan can provide great benefits (both personal and tax-wise), while creating a legacy for generations to come.