The 2017 SALT cap reduced charitable contributions: Evidence from form 990 data

The Tax Cuts and Jobs Act (TCJA) included provisions that reduce the share of filers who itemize deductions, raising the net-of-tax price of gifts to charity. Two such provisions are the near-doubling of the standard deduction and the introduction of a $10,000 cap on the deduction for state and local tax (SALT) payments. The effects of these provisions on taxpayer behavior were not uniform across geographic areas. In locations with initially low state and local taxes, where the $10,000 cap is not binding for many taxpayers, there were small declines in itemization rates. Areas with initially high SALT payments saw larger declines in itemization. This paper makes use of geographic variation to investigate whether TCJA provisions affected gifts received by charitable organizations. Analyzing organization-level data from IRS Form 990, I find that charitable organizations located in counties where the SALT cap is most binding experienced a 1.5 % relative decline in contributions after the tax change.