US Politics

How Trump’s ‘big beautiful bill’ could affect your Giving Tuesday tax break

As Giving Tuesday approaches, many individuals are gearing up to contribute to their favorite charities and causes. However, it’s essential to understand how recent tax legislation, particularly President Donald Trump’s “big beautiful bill,” might impact the tax deductions associated with your charitable donations. The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, significantly altered the landscape of itemized deductions, which could affect the financial benefits of donating on this day of generosity.

One of the most notable changes brought about by the TCJA was the increase in the standard deduction, which nearly doubled for individuals and families. For 2023, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly. This increase means that fewer taxpayers are itemizing their deductions, as many find it more beneficial to take the standard deduction instead. As a result, charitable contributions—once a significant factor in the itemized deduction equation—may not provide the same tax advantage for many donors. This shift could lead to a decrease in overall charitable giving, as people may feel less incentivized to donate if they cannot claim a deduction.

Moreover, the TCJA also placed a cap on state and local tax deductions (SALT), limiting them to $10,000. This change has further complicated the financial calculus for potential donors, particularly in high-tax states where individuals may already be feeling the pinch. For those who do still itemize, the ability to deduct charitable donations remains intact, but with fewer people opting to itemize, the overall impact on charitable organizations could be significant. For example, a donor who previously contributed $1,000 and itemized their deductions might have received a tax benefit that incentivized their giving. However, under the new tax regime, if they opt for the standard deduction instead, the lack of a tax benefit could lead them to reconsider their donation amounts.

In light of these changes, it’s crucial for potential donors to evaluate their financial situations and understand how their contributions may be affected by tax policies. While the spirit of Giving Tuesday encourages generosity, being informed about the tax implications can help donors make more strategic decisions about their charitable giving. As we approach this day dedicated to philanthropy, understanding the interplay between tax laws and charitable contributions can empower individuals to give more effectively and ensure that their generosity has the maximum impact on the causes they care about.