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It’s tax deductible. So what?

The year-end giving season will soon be here. Time to start emphasizing tax deductions in our donor communications, right?   

Well – not so fast…

Pivotal Legislation

If passed this week, the new Republican tax legislation will “simplify” the tax code and increase the standard deduction, thereby reducing the number of people who itemize their taxes. The Financial Times reports that “under current law the Joint Committee on Taxation (JCT) predicts that next year 40.7M taxpayers would deduct charitable contributions from their tax bills. If the House bill becomes law that number would fall to 9.4M taxpayers.”

According to the JCT, what’s proposed may reduce donations that benefit from tax incentives by nearly $100 billion.


Donation Motivators

Currently, only about 30% of people itemize their deductions. So, while 67% of households donate to charities, an equal number are not itemizing their taxes and therefore don’t get the actual benefit of the tax deduction. While we don’t know the overlap between these two groups, it’s safe to say that although the tax deduction may be a perceived benefit, it’s not the primary motivator for giving (at least not for those giving amounts less than $100).

In fact, according to a study by the Indiana University Lilly Family School of Philanthropy, donors stated that the main motivations for giving were “to make a difference” (73.5%) and for “personal satisfaction” (73.1%). In the list of possible reasons, “receiving a tax benefit” came in at 11th place, cited by just 34.4% of respondents.

Of course, people say the tax deduction doesn’t matter—but if it wasn’t offered, would people still give?

More than 80% of itemizers reported making charitable donations, compared with 44% of non-itemizers. So the tax deductibility is likely very important with wealthy taxpayers.

And there’s no disputing the fact that 40% of all individual charitable gifts are given in December, with 12–15% in the last three days of the year alone!

According to Catholic University Law Professor Roger Colinvaux, “One of the points of the [charitable] deduction is to foster altruism, to foster pluralism, to foster civic society.” In other words, there’s a psychological benefit to thinking you’ll get the deduction even if you don’t actually use it.    

But an even larger influencer to giving is the health of the economy. Charitable donations closely follow the rise and fall of GDP. “The larger economy plays a more important role in changes in giving than do tax rate changes” (Center on Philanthropy).

So where do we go from here?

Now, I’m not suggesting you don’t mention the tax deduction in your year-end appeals. It is likely a contributing factor to giving, but it shouldn’t be the only focus of your campaigns. You should also talk about:

  • Your mission and what an individual’s gifts will do
  • How they are making a difference in the lives of others
  • How giving feels good
  • Emphasize a personal connection if one is present

The tax deduction is just another reason for giving in a long list of motives. Don’t lose focus on the ultimate reason people are supporting your organization—to help others, not themselves.


Angela Struebing