The Tax Cuts and Jobs Act, signed in late December, raised the standard deduction for joint filers from $12,700 to $24,000 and for single filers from $6,350 to $12,000. It also limited the state-and-local-tax deduction to $10,000 and capped the home-mortgage-interest deduction. The aggregate effect was to reduce, by roughly twenty million households, the number of tax filers who would itemize their deductions in the following year.
The charitable contribution deduction is itemized. A taxpayer who takes the standard deduction receives no federal tax benefit from charitable giving. Sector economists had spent the fall of 2017 estimating the impact, and the consensus midpoint projection was that itemizing households would fall from roughly thirty percent of all filers to under ten percent — eliminating the federal tax incentive to give for the great majority of American households.
The forecast
The Tax Policy Center, the Indiana University Lilly Family School of Philanthropy, and the Council on Foundations all published projections in the weeks after the bill’s passage. The estimates ranged from a $13 billion to $20 billion annual reduction in individual giving once the new regime fully took effect — a four to seven percent decline against an annual base then approaching $300 billion.
The projections were not predictions about individual donor behavior so much as elasticity calculations: if the marginal cost of giving rises (because the donor no longer receives a deduction), the quantity of giving falls in proportion to the elasticity of donor response. The sector’s standing estimate of charitable giving elasticity was somewhere between -0.5 and -1.1, depending on income level and method.
What the bill did not do
Several proposals that had been actively discussed in the months before passage did not make it into the final bill. A "universal charitable deduction" — a non-itemized deduction available to all filers — had been advocated by Independent Sector and a coalition of nonprofit umbrella groups. It was not adopted. A reduction or capping of the value of the charitable deduction for high-income filers, which had been periodically proposed in earlier administrations, was also not adopted; the deduction remained available at full value to itemizers.
The result was a tax law that left the charitable deduction nominally intact while structurally narrowing the donor population that could use it. The deduction became, for the first time in its century-long history, primarily a tax preference for upper-income households.
What sector leaders said in private
Public statements from sector leaders in late December were carefully calibrated — expressing concern but not prediction, urging donors to "give as you have always given." Private conversations were more direct. Several chief development officers at large institutions later acknowledged that they had used the bundling strategy — encouraging donors to consolidate two or three years of planned giving into a single year to clear the higher itemization threshold — as the operational response of the next several years.
The full data on the actual impact would not be available until the 2019 Giving USA report, which would confirm a measurable decline in individual giving as a share of disposable income for the first time outside a recession.