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With Trump’s tax bill set to dent giving by the wealthy, can middle-class donors make up the difference?
A woman puts money into a Salvation Army red kettle outside of Giant Supermarket in Alexandria, Virginia on November 22, 2023.
Eric Lee | The Washington Post | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
New tax laws risk reducing charitable giving by the wealthy next year, economists and academic experts say, leaving less-wealthy Americans to make up the difference.
Under President Donald Trump’s “big beautiful bill,” signed into law in July, several tax benefits for wealthy donors will be reduced. Top earners will also have their effective tax benefit cut from 37% to 35%. The Indiana University Lilly Family School of Philanthropy estimates this cap alone will reduce giving by $4.1 billion to approximately $6.1 billion annually.
In addition, the bill also limits tax incentives for itemizers, who will only be able to deduct donations in excess of 0.5% of their adjusted gross income.
At the same time, the bill also creates new incentives for middle- and lower-income filers to give. Starting next year, roughly 140 million taxpayers who do not itemize will still be able to deduct up to $1,000 in cash donations per filer. About 90% of taxpayers take the standard deduction since it was raised in 2017 during the first Trump administration.
While the tax changes may help broaden the base of giving, making it less dependent on the ultra-wealthy, experts are skeptical that the math will balance out.
Elena Patel, co-director of the Urban-Brookings Tax Policy Center, told Inside Wealth she is not optimistic that middle- and lower-income donors will be able to make up the shortfall as top earners give less.
“The nonprofit sector says that every dollar matters, and so incentivizing small donations from every household could have a meaningful impact for certain kinds of organizations. But the truth is that those kinds of contributions, however, just are not the bulk of charitable giving in the charitable sector,” she said. “That 2-percentage-point reduction [for top earners] might not seem like a big deal, but you have to keep in mind the scale of gifts that are being given among the highest-net-worth individuals in the United States.”
What the ‘K-shaped’ economy means for philanthropy
Charitable giving by American households continues to rise, reaching $392.45 billion last year, per the latest report by the Lilly School of Philanthropy for Giving USA. That’s up 52% since 2014.
But while donations are increasing, fewer Americans are giving as wealthy donors make up an increasing share of philanthropy, according to the university’s research.
Amir Pasic, dean of the Lilly School of Philanthropy, said incentivizing Americans of all income levels to donate is valuable in and of itself.
“We’ve had this general problem of dollars going up but the number of donors going down. This is a positive development because this could really increase the number of donors,” he said.
However, Pasic said, financial stress has limited everyday donors’ ability to give, while wealthier ones have been donating more. The share of Americans who donate dropped from 66.2% to 45.8% between 2000 and 2020, according to the university’s research.
“Economic uncertainty is always worrisome for people’s giving planning,” Pasic said.
This lopsided, or “K-shaped,” economy shows signs of getting worse amid tariff hikes and inflation. Lower- and middle-income consumers are spending less on everything from McDonald’s burgers to flights, while wealthier Americans flex their spending power.
Will the new deduction move the needle?
Economist Daniel Hungerman said he questions whether the new deduction would spur a substantial number of donations or mainly reward taxpayers who would have given anyway.
While the new deduction is larger, at $1,000 per single filer and $2,000 for married joint filers, a similar legislative effort in the ’80s failed to move the needle on charitable giving, he said. A temporary $300 deduction in 2020 spurred by the Covid pandemic only increased charitable donations by 5%, according to the Tax Foundation.
Trump’s tax bill also permanently raises the standard deduction, which significantly dampens charitable giving, Hungerman said. His study estimated that the higher deduction led to a permanent annual drop of $16 billion after the 2017 reforms.
However, raising the cap on the federal deduction for state and local taxes (better known as SALT) may provide some relief, he said. More taxpayers in high-cost states will benefit from itemizing, which encourages donations.
Hungerman said encouraging everyday donors to get in the habit of giving now could lead to higher levels of donating later if they increase their wealth.
“Maybe what is even more compelling to me is the long game, if we can send a message that everybody should give like this, and we change some of these people’s giving behavior,” he said. “Somewhere out there is the Bill Gates of tomorrow.”
What donors can do now
Currently, taxpayers who plan to take the standard deduction would benefit from waiting until 2026 to make donations. However, itemizers and high-income donors will get more bang for their buck by giving before the end of the year.
Robert Westley, senior vice president and regional wealth advisor at Northern Trust, said he is recommending that clients accelerate their donations to this year if they were planning to donate over the next four years.
Filers can only deduct up to 60% of their adjusted gross income for cash donations to public charities per year. The percentage drops to 30% for contributions of long-term appreciated assets like stock or real estate.
However, taxpayers can generally carry forward excess deductions over five years, he said. Still, it’s unclear how much bang they will get for their buck as the IRS has yet to specify whether excess deductions will be subject to the new floor and ceiling on charitable deductions, according to Westley.
For donors who want to give more now but are unsure of how to do so, he said he suggests giving to a donor-advised fund, or DAF. With a DAF, donors get an upfront deduction but can wait to allocate those funds to specific charities. For donors wanting to offload appreciated assets, it is much simpler to donate stock to a DAF than directly to a nonprofit.
Given this year’s stock run up, Westley said many of his clients are looking to donate appreciated stock, especially in tech, to offset gains as well as rebalance their portfolios.
“Their equities have appreciated, and some of them might now represent a higher percentage of the portfolio than their target asset allocation,” he said. “When you donate those risk assets to charity, you get the tax benefit, you don’t realize the gain, and when it’s done you’ve lowered your risk-asset allocation.”
Lawyers and tax planners are still waiting for guidance from the IRS on a bevy of issues stemming from the changes. For instance, it’s still unclear whether deductions will be capped for non-grantor trusts that make charitable donations, according to Westley.
But high-income donors still have many tools at their disposal, he said. Top earners who are 73 and older can effectively reduce their taxable income dollar-for-dollar by giving their required minimum distributions from an IRA to charity.
Westley said this tactic is popular among his retirement-age clients and likely to become even more so with the raised SALT cap. Filers can lower their income to qualify for the enhanced SALT deduction, which maxes out at $40,000 for taxpayers with incomes of $500,000 or less.
“You’re not even dealing with any of the itemized deduction rules,” he said. “There’s no ceiling on the tax benefit and there’s no floor or hurdle to get over for the deduction.”
One of Britain’s most prolific rail fare dodgers could face jail after admitting dozens of travel offences.
Charles Brohiri, 29, pleaded guilty to travelling without buying a ticket a total of 112 times over a two-year period, Westminster Magistrates’ Court heard.
He could be ordered to pay more than £18,000 in unpaid fares and legal costs, the court was told.
He will be sentenced next month.
District Judge Nina Tempia warned Brohiri “could face a custodial sentence because of the number of offences he has committed”.
He pleaded guilty to 76 offences on Thursday.
It came after he was convicted in his absence of 36 charges at a previous hearing.
During Thursday’s hearing, Judge Tempia dismissed a bid by Brohiri’s lawyers to have the 36 convictions overturned.
They had argued the prosecutions were unlawful because they had not been brought by a qualified legal professional.
But Judge Tempia rejected the argument, saying there had been “no abuse of this court’s process”.
JSW Jetour T2 Launch: JSW Motors Limited, the passenger vehicle arm of the JSW Group, is reportedly preparing to enter the Indian car market this year. It has partnered with Jetour, a China-based automotive brand owned by Chery Automobile, and the Jetour T2 SUV could be the company’s first product, according to the reports.
Media reports suggest that the launch will happen independently and not under the JSW MG Motor India joint venture. The SUV will wear a JSW badge and name, instead of the Jetour branding. The upcoming SUV will be assembled at JSW’s upcoming greenfield manufacturing facility in Chhatrapati Sambhaji Nagar, Maharashtra.
According to the reports, the company plans to have the vehicle on sale by the third quarter of this year. With this move, JSW aims to establish itself as a standalone carmaker in India.
Expected Powertrain
The SUV is likely to arrive with a 1.5-litre plug-in hybrid setup. Internationally, this hybrid powertrain is offered with both front-wheel drive and all-wheel drive options. It is still unclear which version will be introduced in India.
Design
In terms of design, the T2 is a large and rugged-looking SUV. It has a boxy and upright stance, similar to vehicles like the Land Rover Defender. Despite its tough appearance, it uses a monocoque chassis instead of a ladder-frame construction.
Size
The SUV measures around 4.7 metres in length and nearly 2 metres in width. This makes it larger than the Tata Safari, even though it is a five-seater. A longer 7-seat version is also sold in some markets.
Price
Pricing details for India are yet to be announced. For reference, the front-wheel-drive five-seat T2 i-DM is priced at AED 1,44,000 (around Rs 35 lakh) in the UAE.
Jetour
Jetour is a brand owned by Chinese automaker Chery. Launched in 2018, it focuses mainly on SUVs and is present in markets across China, the Middle East, Africa, Southeast Asia and Latin America.
John Swinney has been pressed over whether this week’s Scottish Budget gives some workers the “smallest tax cut in history” – with Tory leader Russell Findlay branding the reduction “miserly” and “insulting”.
The Scottish Conservative leader challenged the First Minister after Tuesday’s Holyrood Budget effectively cut taxes for lower earners, by increasing the threshold for the basic and intermediate bands of income tax.
But Mr Findlay said that would leave workers at most £31.75 a year better off – saying this amounts to a saving of just £61p a week
“That wouldn’t even buy you a bag of peanuts,” the Scottish Tory leader said.
“John Swinney’s Budget might even have broken a world record, because a Scottish Government tax adviser says it ‘maybe the smallest tax cut in history’.”
Raising the “miserly cut” at First Minister’s Questions in the Scottish Parliament, Mr Findlay demanded to know if the SNP leader believed his “insulting tax cut will actually help Scotland’s struggling households”.
The attack came as the Tory accused the SNP government of increasing taxes on higher earners, with its freeze on higher income tax thresholds, which will pull more Scots into these brackets.
This is needed to pay for the “SNP’s out of control, unaffordable benefits bill”, the Conservative added.
Mr Findlay said: “The Scottish Conservatives will not back and cannot back a Budget that does nothing to help Scotland’s workers and businesses.
“It hammers people with higher taxes to fund a bloated benefits system.”
Hitting out at Labour – whose leader Anas Sarwar has already declared they will not block the government’s Budget – Mr Findlay said: “It is absolutely mind-blowing that Labour and other so-called opposition parties will let this SNP boorach of a budget pass.
“Don’t the people of Scotland deserve lower taxes, fairer benefits and a government focused on economic growth?”
Mr Swinney said the Budget “delivers on the priorities of the people of Scotland” by “strengthening our National Health Service and supporting people and businesses with the challenges of the cost of living”.
He insisted income tax decisions in the Budget would mean that in 2026-27 “55% of Scottish taxpayers are now expected to pay less income tax than if they lived in England”.
The First Minister went on to say that showed “the people of Scotland have a Government that is on their side”.
Referring to polls putting his party on course to win the Holyrood elections in May, the SNP leader added that “all the current indications show the people of Scotland want to have this Government here for the long term”.
Benefits funding is “keeping children out of poverty”, he told MSPs, adding the Budget contained a “range of measures” that would build on existing support.
The First Minister said: “What that is a demonstration of is a Government that is on the side of the people of Scotland and I am proud of the measures we set out in the Budget on Tuesday.”
Meanwhile he said the Tories wanted to make tax cuts that would cost £1 billion, with “not a scrap of detail about how that would be delivered”.
With the weekly leaders’ question time clash coming less than 48 hours after the draft 2026-27 Budget was unveiled, the First Minister also faced questions from Scottish Labour’s Anas Sarwar, who insisted that the proposals “lacks ambition for Scotland”.
Pressing his SNP rival, the Scottish Labour leader said: “While he brags about his £6 a year tax cut for the lowest paid, one million Scots including nurses, teachers and police officers face being forced to pay more.
“Even his own tax adviser says this is a political stunt. So why does John Swinney believe that someone earning £33,500 has the broadest shoulders and therefore should pay more tax in Scotland?”
Mr Swinney, however, said that many public sector workers would be better off in Scotland.
He told the Scottish Labour leader: “A band six nurse at the bottom of the scale will take home an additional £1,994 after tax compared to the same band in England.
“A qualified teacher at the bottom of the band will take home £6,365 more after tax in Scotland than the equivalent in England. There are the facts for Mr Sarwar.”
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