Proposed State Legislation Addresses Charitable Giving Tax Credits

February 20, 2019

Several states are introducing bills to counter the negative effects of the Tax Cuts and Jobs Act, especially regarding charitable giving. The new tax law nearly doubles the standard deductions for individuals ($12,000) and couples ($24,000), which makes it less likely that taxpayers will claim itemized deductions when filing this year.

Lawmakers in Kansas, New York and Virginia have proposed allowing taxpayers to claim itemized deductions on state returns, even when the standard deduction on federal returns is elected. The Virginia bill also proposes a nonrefundable tax credit to taxpayers that forgo itemizing deductions on federal returns. Arizona legislation has introduced a retroactive non-itemizer charitable deduction. Colorado and Minnesota have already passed similar bills that offer taxpayers charitable tax incentives, regardless of whether they itemize or take the standard deduction on their federal returns.

Other states have considered new giving incentives for certain charitable groups. For instance, a Mississippi bill is proposing a tax credit for private school and homeschool costs for a taxpayer’s dependent children. Meanwhile, in Iowa, legislators want to offer a credit for charitable donations to regenerative medicine research and a tax exemption to nonprofit employees who provide services to people with disabilities.