”Charitable Act” Levels the Field for Nonprofit Donations with New Tax Benefits

A new bipartisan bill called the Charitable Act has been introduced to allow taxpayers who take the standard deduction to deduct their donations to charities, religious groups, and other nonprofit organizations. The above-the-line charitable contribution deduction expired in 2022, but the proposed write-off amounts in the Charitable Act are more generous for donors. According to a report by Market Watch on March 4, 2023, the reduction quantity would equal a third of the typical deduction and could have a value exceeding $4,500 for a single person or above $9,000 for a married couple who file their taxes together. The proposed write-off would increase over time because it’s tied to the standard deduction, which is indexed for inflation and adjusted annually.

In tax year 2021, 90% of more than 154 million individual returns took the standard deduction, according to IRS statistics. During that year, roughly 47 million returns used the above-the-line charitable deductions to write off $17.6 billion in contributions, according to IRS data.  If passed, the law would go into effect this year, with the goal of encouraging more giving and making the tax code’s benefits available to everyone, not just the wealthy.

Nonprofit leaders welcome the bill, saying that making the deduction permanent will provide an ongoing incentive to increase giving and counteract inflation. Charitable giving has not kept up with inflation, let alone met increasing community needs, according to the president and CEO of the National Council of Nonprofits, as reported by The Nonprofit Times on March 2, 2023. The Charitable Act provides solid tax policy that will encourage millions more taxpayers to donate to their local community-based organizations, allowing individuals to feel more invested in, connected to, and supportive of their neighbors’ and community’s joint prosperity.

WASHINGTON, DC – NOVEMBER 15: U.S. President Joe Biden signs the Infrastructure Investment and Jobs Act as he is surrounded by lawmakers and members of his Cabinet during a ceremony on the South Lawn at the White House on November 15, 2021 in Washington, DC. The $1.2 trillion package will provide funds for public infrastructure projects including improvements to the countrys transportation networks, increasing rural broadband access, and projects to modernizing water and energy systems. (Photo by Kenny Holston/Getty Images)