Capping Charity: How Deduction Limits Could Cost Massachusetts Charities

Lots of things were different a quarter of a century ago in Massachusetts. The Red Sox were still cursed, Tom Brady and Bill Belichick had just joined the Patriots organization, and the Big Dig was still ongoing.

One thing that has remained consistent, however, is Massachusetts residents’ opinion on tax deductions for charitable donations. 

Back in 2000, 67 percent of Massachusetts residents voted to adopt a state tax deduction for all qualifying charitable contributions. The policy, however, was put on hold in 2002 and only recently re-implemented in 2023.

Now, Governor Healey wants to cap the deduction at $10,000 for married couples and $5,000 for individuals in her fiscal year 2026 budget. MOA’s most recent poll discovered the majority of Massachusetts voters surveyed are not sold on a cap on charitable deductions. Only 28 percent said they support the move, while 44 percent opposed it. (Others needed more information.) 

Donation Caps Can Reduce Giving 

Ultimately, the proposal to cap tax deductions on charitable giving has the potential to reduce fundraising amounts for Massachusetts’ 37,000+ active 501(c)3 nonprofit organizations, many of whom are still recovering from pandemic-era challenges. This includes organizations big and small that support the elderly and disabled, provide affordable housing assistance, protect the environment, promote education, and provide quality health care. They also play a vital role in the economy, creating over 550,000 jobs and employing more than 17 percent of the Commonwealth’s workforce.

We have seen it happen at the federal level. After the 2017 Tax Cuts and Jobs Act placed a $10,000 cap on state and local tax deductions, many taxpayers stopped itemizing deductions and individual contributions fell by 6 percent of the national GDP between 2017 and 2018. University of Notre Dame and the National Bureau of Economic Research’s report showed that donations dropped by $20 billion following the federal deduction cap. 

The vast majority of Bay State taxpayers aren't eligible for the federal deduction, meaning the state deduction can be a major factor in incentivizing them to donate. With individuals providing over two-thirds of all charitable contributions nationwide, any policy that discourages giving has outsized impacts on nonprofit and charity funding.

Nonprofits Already Lack Sufficient Funds

Massachusetts nonprofits depend on individual donations now more than ever. A 2025 State of the Nonprofit Sector Report by Forvis Mazars found that almost half of the nonprofits they studied in the U.S. lack sufficient funds to deliver their programs and services. Three out of four had eliminated staff and reduced their services. At the same time, over three quarters saw a demand in their programs or services rise. Clearly, the work these nonprofits do remains crucial to their communities, but private funding just isn’t keeping pace. 

As the cost of living continues to rise – and residents in Massachusetts specifically feel the pinch –  it may come as no surprise that nonprofits are taking a hit. MOA’s recent polling showed only 17 percent of Massachusetts voters increased their charitable giving this past holiday season. In tough economic times, tax deductions remain a crucial incentive to get people to donate.

Conclusion

Twenty-five years have passed since Massachusetts voters first made their voices heard on charitable tax deductions and much has changed across our Commonwealth. But the importance of supporting our charities and nonprofit sector remains as vital as ever.

At a time when grant funding is being cut at the federal level, our state’s nonprofits need all the help they can get. Now is not the time to implement donation caps that could have an adverse impact on much-needed funds.

The numbers suggest that some voters are undecided on the issue—but if history is any guide, Massachusetts voters have long supported the idea that giving should be encouraged, not capped. Policies that encourage rather than hinder philanthropy should prevail in Massachusetts.