Recently proposed federal legislation could help nonprofit organizations recoup some of the annual donations they might have lost when the standard deduction increased a few years ago, causing a wide swath of taxpayers to stop itemizing deductions and thereby erasing tax benefits for many charitable contributions. Known as the Charitable Act, the 2023 proposed legislation would allow non-itemizers to deduct up to one-third of the applicable standard deduction.

To be sure, the increased standard deduction included in the Tax Cuts and Jobs Act of 2017 was no minor tweak to the law. Tens of millions fewer households itemized their deductions in the years following the increased standard deduction. That’s a lot of people who suddenly lost part of the incentive to make charitable gifts. The Charitable Act would strive to alleviate some of the negative impact on charities.

In addition, the “universal charitable deduction” may be back on the table. In general, taxpayers like the idea of additional charitable deduction opportunities, with 42 million taxpayers taking advantage of the $300 “universal” charitable deduction offered in 2020, and 24% of those having gross income of less than $30,000. That opportunity was extended in 2021 but discontinued for 2022. Consistent with those findings, polls show strong support for restoring the universal charitable deduction.

The team at the Winona Community Foundation is watching this legislation closely. We will keep you informed!