I’m a big fan of charitable giving. Long-time readers know that I’m always touting the benefits of donating to your favorite nonprofit.
Five days into blogging and I was announcing how you can support good causes and do yourself some tax good, too. And a check of my posts with the "charity" tag underscores that issue as a recurring blog theme.
I continue to encourage you to donate to your favorite charity. And, if you itemize, I encourage you to take the tax break afforded your philanthropy.
But some folks are concerned that those tax breaks might be outweighing the benefits of the donations.
In today’s New York Times, reporter Stephanie Strom looks at giving (and getting back) in this "age of riches." As the parenthetical phrase indicates, her story focuses on the big-time donors.
She reports that the rich are giving more to charity than ever, but for every $3 they give away, the federal government typically gives up a dollar or more in tax revenue. In these cases, it’s not just the Schedule A charitable tax deduction that keeps money out of the U.S. Treasury. It’s also the savings such gifts provide donors, but cost the government, when time comes to eventually collect estate taxes.
Comparing contributions: Some interesting questions are raised. The biggest issue for many concerned about all this mega-giving by mega-million(and more)aires is the types of nonprofits that receive the gifts.
Ah, yes. The old "my charity is nobler than
Do gifts to groups that support human needs, such as medical research or housing for the homeless, count more than gifts to, say, environmental or animal protection organizations?
What about to educational institutions?
Sure, learning is important. But are those millions that Thurston Howell III and Lovey handed over to their alma mater for construction of the Howell Memorial Building really doing that much "good?"
On a less-grand scale, where does a donation to a local art museum rank in relation to money that helps a soup kitchen feed a few more hungry families?
It’s charitable apples and oranges. If you think about it too much, your head might explode
But there are real dollars involved, and not just those you and I give.
Counting the costs: Strom cites Joint Committee on Taxation data that says the charitable deduction cost the government
The debate rages not just between the wealthy donors and those of us who don’t have that much to give (or get back tax wise), but also among the well-to-do.
Investor and philanthropist extraordinaire Warren Buffett makes no secret of his disdain for the inequities in the nation’s tax system, which offers the wealthy better tax breaks for charitable giving than it does the average taxpayer. It’s worth noting that Buffet gets no tax break for his current donations, but that’s because he’s carried over deductions for past donations that he has not used.
It’s unlikely that the deduction for donations will go away. The tax system already caps it for the very rich and/or overly generous. And there continues to be rumblings on Capitol Hill about expanding the option to donors who don’t itemize.
For now, the best strategy — philosophical, moral and tax — is to give to your favorite charity and make sure that it spends your gift the way you want. Nonprofits need to be held just as accountable, and perhaps more so, for their finances as do money-making enterprises.
You can check IRS Publication 78 or GuideStar to make sure your chosen charity is tax-qualified by the IRS. This story has details on claiming your deduction.
