The bill’s greatest importance lies in extending a tax incentive for charity to more Americans.
The Trump “big beautiful” tax bill has a lot to say about charitable giving—affecting both households who itemize their tax returns and those who don’t. Beyond its technicalities, however, a case can be made that, for the long run, it protected the charitable tax deduction—which has been part of the income tax code since its inception—by extending it to a broader segment of the American population. At the same time, it might not lead to an increase in actual charitable contribution.
To appreciate why, one must look at what has already changed since the 2017 passage of the Tax Cuts and Jobs Act—most of whose key elements the Trump tax bill extends. Both bills increased the “standard deduction”—the dollar amount (approximately $31,000), which mitigates the tax bite even for households who do not itemize their tax returns and deduction mortgage interest—for charitable gifts. That change led to a dramatic reduction in the number of itemizers—from thirty to just seven percent. That meant, in effect, that only the most affluent households—with large tax deductions—retained any incentive to use the charitable deduction.
Not surprisingly, individual charitable giving—at least that reflected on tax returns—has been inconsistent, falling by 2.4 percent inflation-adjusted, in 2023, before recovering and growing 5.1 percent in 2024. Such variation reflects reliance on large donors who may be influenced by a rising or falling stock market—as opposed to consistent, small donors supporting local churches (religion is the most popular charity category) who no longer could avail themselves of the charitable deduction.
The 2025 Trump bill changes this picture in an important way. It added a generous “above the line” charitable deduction—$1000 for individuals, $2000 for joint filers—such that even those using just the standard deduction now have a tax incentive to give. The importance of this transcends its actual impact on charitable gifts. A tax break that provided a benefit for just seven percent of taxpayers—who also happen to be the most affluent households in “blue states”—would, in the long run, risk being labeled a loophole for the rich. The above-the-line deduction will be a firewall protecting the idea of a charitable deduction overall, the loss of which would be disastrous for American civil society institutions, from churches to food banks. This can well be referred to as democratizing charitable giving—at least as far as the tax code is concerned. Otherwise, tax-incentivized charitable giving was becoming a luxury good.
In keeping with that spirit of a more egalitarian approach to the charitable tax incentive, the Trump bill helped to pay for the “above-the-line” break for non-itemizers by limiting the break for those who do itemize. No charitable gifts will qualify for a deduction for these affluent households unless their total giving is at least 0.5 percent of their income. That may be a high bar for those with the highest incomes. The bill also limited any tax break only to real-time “cash” contributions—rather than increasingly popular donor-advised funds, which allow for an immediate tax deduction but from which charitable contributions can be disbursed over multiple years. The continuing tax code limitations on “DAFs” is hard to understand. Contributions made to the likes of Vanguard or Fidelity Charitable, as well the nation’s 800-plus community foundations, can only be used for charitable giving, grow in value when invested in a rising stock market—and may well be more important in later years than in a given calendar year. DAFs, for instance, had stored assets that allowed them to increase their disbursements during the COVID pandemic.
One can hope that the 0.5 percent charitable giving requirement for itemizers will boost their giving in order to qualify for the tax break. There is no guarantee that will happen, however. Nor is there any guarantee that the “above the line” deduction will actually boost charitable giving by small, less affluent donors.
There has historically been—and remains—a great unknown about US charitable giving: how much is simply not reflected on tax returns at all. Think here of cash dropped in a collection plate or a Salvation Army red bucket. What’s more, the $1000/$2000 tax break is a ceiling. Cash contributions that are less will only qualify for a lesser deduction, while those which are higher will be capped. It’s simply impossible to know whether charitable giving that does not play a role on tax returns will increase. To learn more, we would have to rely on rigorous survey research, focused on a hard-to-reach group: lower-income households.
The overall impact of the Trump “beautiful bill” will likely be modestly positive. But its greatest importance lies in extending a tax incentive for charity to more Americans—and effectively ensuring that such incentives will remain a feature of our income tax law for years to come.
