Wednesday, March 25, 2009

Do Tax Deductions Matter When giving to Charity?

Continuing our discussion on charitable giving....I would like your thoughts on an article I came across in The Chronicle of Philanthropy regarding Obama’s charitable giving plan - The article discusses with a panel, the early stages of Obama’s proposal regarding the change in charitable giving to be used to help finance the country’s health-care system.Here is the proposed plan cited from the blog:

In a document outlining his 2010 budget plans, President Obama proposed limiting the value of the tax break for itemized deductions, including donations to charity, to 28 percent for families making more than $250,000. In other words, taxpayers would save 28 cents on their federal income taxes for each dollar donated.

That would reduce by as much as 20 percent the amount wealthy taxpayers could get in tax breaks. Under the current system, taxpayers who are in the 33 percent or 35 percent tax brackets use that rate to claim deductions.

The president says the proposal on itemized deductions — which would also apply to claims such as mortgage interest — would raise $318-billion over 10 years. That money would help pay for a 10-year $630-billion reserve fund designed to help make health care more affordable and available.

After reading this article, it made me wonder if wealthy Americans, who often donate large amounts to charity, will still continue to give at the rate they have been giving. Do you think that this proposal will have a negative effect on non profits? When you donate, in whatever income category you are in, how important is getting a tax deduction in your decision to help a charity?

Karen Maunu
Associate Executive Director
Love Without Boundaries


  1. If this plan results in fewer donations to non-profit foundations helping Americans, like Second Harvest Food Bank, Children's Health Fund, or St. Jude's Hospital, then how will these non-profits continue to offer services to people in need? It seems to me that reducing donations to non-profits might cause even more Americans to become dependent upon government services.

  2. I believe donations will go down. Some wealthy donors will likely continue to give at current levels because they already give beyond the rate of deductibility. But others will have less discretionary income to donate since they will pay more taxes - even those making more than $250,000. Middle class families may have less to donate as well if the mortgage deduction is removed. The government, any government, will never be as efficient as my favorite 501c3s so even if the federal government took in the same amount as lost in donations the overall result will be less funds to help the needful.

    However, some of us will support causes we believe in like LWB as long as we have means to do so, deductions or not. Caring humans do what's right out of love for others. Keep the faith!

  3. Karen, when I read your post it made me think of all the people around the world who give to LWB who are from other countries, so they get no tax break whatsoever. They just give to help kids. I think last year we had about 17 different countries represented, which I think is so cool since we're all working together to change lives. I still think the tax deduction is important, however, as all US charities love December and year end giving. As a charity administrator...I have to admit to giving a sigh whenever I see anything that might impact donations and the ability to help more kids. Guess only time will tell.

  4. I agree with Not Stated, "The government, any government, will never be as efficient as my favorite 501c3s." This leads me to believe that people who truly care will make donations to charities that they feel are accomplishing the goals they champion...if they can.

    I do worry that the loss of mortgage deductions, loss of charity deductions and higher taxes will impact non-profits negatively. I know that it will impact my own family, and even though we would love to continue our support, I question our ability to do so.

  5. To me the tax break is a bonus, but usually has no bearing on my decision who to give to or how much. I usually base more of my decision on how much of the money actually goes to the kids or "cause". I avoid the ones that have too big overhead because I do want every dollar to count as much as possible.

  6. Karen as a non US person in a country (Ireland) that does not easily give tax breaks to donations (it does somewhat to corporations) then it is not a motivational part to any "regular" person giving.

  7. My husband had a good year in his business last year - and because of it, we have moved to a higher tax bracket. We have to pay so much in taxes that we now are having to cut way back - this includes our lawn service, wonderful lady that cleans our house, and, sadly, our ability to contribute to charitable organizations. How on earth does this help the economy? I hate that we have to make cuts for people and things we care about.

  8. I truly believe that those who donate to LWB and many other organizations do so out of the amazing generosity in their hearts. Maybe a few of those 12/31 donations will disappear, but all in all I don't think people purchase houses because they'll get a tax break and I truly don't think people make donations because of the tax break. There are lots of people who make generous donations and then take a standard deduction each year!!

  9. I love to hear all of your thoughts and comments. So many people are struggling in today's economy I would hate to see another reason for people to not give to their favorite charity. I love that so many people from other countries donate to LWB because they want to help and not because they are getting a tax benefit. I sincerely hope that people who live in the US will continue to do the same no matter what happens.

  10. Karen,

    We are one of those families that gives more than we could ever deduct in taxes. We do definitely take into account those organizations who use the money directly for the need as opposed to those organizations who have large overheads and you are not assured that much (if any) of your money is really making it towards the people with the real needs. We love how LWB believes that the money should be used for the needs (instead of lots of overhead costs). That's one of the many reasons why we support you. I, personally, also follow God's calling. If I feel that He wants me to donate towards a certain organization, then I feel that even if I have to give up something else and squeeze my budget temporarily, that I must give. I believe that if I act on God's calling, that He will provide a way for us financially if the need were to arise as we followed his lead. One comment: You all could save money by not sending out thank you notes in the mail. We don't feel that it is really needed as we feel the thanks just by knowing our money is going where it is intended and we receive plenty of thanks by seeing the smiles on kid's faces on your website and in cards that we receive from them personally in the mail at times. That is plenty of thanks for us! Also, like so many have already said, we get satisfaction just by the act of giving.

  11. Wow! Thank you so much for your kind message of support....this means so much to all of us. We do work so hard to make sure that every penny we raise goes to the kids. We appreciate all you are doing to help these kids.

    We do want every person to know when they donate to us, how very grateful we are and we feel that it is so important to thank people so that they know. But, I also understand that your point about saving money on postage. The interesting thing is that most of the volunteers that write our thank yous, pay for the postage out of their own pocket. They feel that it is a little that they can do to help.

    Thank you so much for writing!