Does the Charitable Tax Deduction Motivate You to Donate?
I spend a great deal of time thinking about potential donors. I believe research is one of the keys to success in fundraising. My excitement comes when I engage with people and ask for a gift. The greatest percentage of a fundraising person’s time, unfortunately, is not exciting. How many times do you sit at a desk and review names and information that might provide the LAI (linking, ability, inclination) for a potential ask at some point? I also think about what motivates a donor to give. There are certainly several factors that one must consider, and this could be a moving target. One constant motivating factor in making a gift might be the charitable deduction. Or is it?
The Network for Good published a blog post, “The Secret to Getting People to Give: 14 Reasons Why People Donate,” that promotes the theory that giving isn’t a business transaction, but a human connection. You need to make a meaningful connection to donors and show them that they matter and how they can make a difference. The blog post encourages us to contact our donors and ask them why they give. It also notes that people give from the heart in a personal way and the act of giving is immediate.
Here are the top 14 reasons why donors give according to the blog:
- Someone I know asked me to give.
- I felt emotionally moved by someone’s story.
- I want to feel I am not powerless in the face of need and can help.
- I want to feel I am changing someone’s life.
- I feel a sense of closeness to a community or group.
- I want to memorialize someone.
- I was raised to give to charity.
- I want to be “hip” and supporting this charity is in style.
- It makes me feel connected to other people.
- I want to have a good image for myself/my company.
- I want to leave a legacy that perpetuates me, my ideals or my cause.
- I feel fortunate and want to give something back to others.
- I give for religious reasons—my faith teaches me to help others.
- I want to be seen as a leader/role model.
It is interesting to see in this blog that there is no mention of a charitable deduction. According to the Council for Advancement and Support of Education (CASE), the current taxpayer’s charitable deduction rate is tied to his or her marginal tax rate. For example, if a taxpayer earns more than $400,000 per year, the taxpayer receives a tax benefit of nearly $0.40 for every $1 he or she donates to charity.
“President Donald Trump has proposed a hard dollar cap on itemized deductions, including the charitable deduction, of $100,000 for individuals and $200,000 for married couples. Additionally, by significantly increasing the standard deduction, the Trump tax plan would effectively eliminate the charitable deduction for millions of taxpayers who would no longer choose to itemize.” —CASE
Sean Norris wrote an article titled “Trump Tax Plan Could Reduce 2017 Charitable Giving by Up to $26.1B,” where he noted that Trump’s plan creates three separate potential tax avenues for giving to drop, which include a reduction in marginal tax rates, increase in the standard deduction and lowered cap on itemized deductions. The Business Insider article titled “Trump’s Tax Plan Is Giving Realtors and Nonprofits Something to Worry About” points out that the number of tax brackets will be reduced from seven to three.
There are about 143 million tax filers in the U.S., and approximately 48 million of those tax filers itemize their deductions. If Trump’s tax plan is passed, the number of people that itemize their deductions could fall to 22 million. Other potential tax plan ideas may reduce even further with the wealthiest individuals continued inclination to make large gifts for tax-saving reasons.
In The Washington Post’s article titled “Charitable Deduction Is Indispensable, But Shouldn’t Be Sole Motivation for Giving,” mentions the Dunham Company, a consulting firm for charitable organizations that compiled a survey regarding charitable giving.
According to the survey, people support the deduction, regardless of household income, education, age, race or gender. Thirty-three percent of donors in the survey said they “would reduce their giving if the charitable deduction didn’t exist.” When it came to the group between the ages of 40 and 59, 40 percent said they would reduce their giving.
Giving is a personal decision. It is complex with various factors at play. Stay attuned to potential tax law changes. If there are dramatic shifts in the tax laws, we may find out quickly what actually motivates donors to give. My hope is every opportunity continues for potential donors to give either for tax reasons or from the heart. At the end of the day, those that ultimately benefit from donations will be at most risk from changes in donor behavior based upon whether the charitable tax deduction or any other key motivational factor for giving continues to exist.
Duke has extensive experience as a nonprofit practitioner and consultant. He has been a contributing author to NonProfit PRO for the last nine years and has had the CFRE designation for the last 25 years. He has also been a member of the Association of Fundraising Professionals for over 35 years. He received his doctorate from West Virginia University with an emphasis in philanthropy, masters from Marshall University with an emphasis on resource development and a bachelor's degree from West Virginia University with emphasis in marketing/management. Currently he is executive director of development for The Salvation Army Indiana Division. Contact Duke at firstname.lastname@example.org.