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Would a limit on tax deductions mean less charitable giving?

November 27, 2012

First there was Black Friday. Then came Small Business Saturday. So Cyber Monday naturally followed.

We would have had Dallas Cowboys Suck Sunday, but they did that on Thanksgiving Day. (Sorry. Digressing and still working through my life-long fan issues.)

And today is #GivingTuesday.

The idea, being promoted by GivingTuesday.org and founded by a coalition of nonprofits, business, individuals led by New York City's 92nd Street
Y
, was created as a day on which America comes together to give back.


Giving Tuesday logo

As the hastag in front of the name indicates, Twitter and other social media outlets are key to the program. It's working. So far, #GivingTuesday has enlisted more than 2,000 partners who are encouraging people to give their time, service and money today, Nov. 27, to help organizations who help others.

A time for giving: The timing is perfect. Most charitable gifts in the United States are made at the end of the year, when nonprofits send out their annual solicitations for financial help.

It looks to be working. In 2011, Americans contributed $217 billion, up 4 percent from 2010 giving level.

"Giving to charity is something Americans do better than anyone else," said Matthew Bishop, U.S. business editor of The Economist and author of "Philanthrocapitalism: How Giving Can Save the World."

Bishop, who appeared on MSNBC's Morning Joe program today to discuss #GivingTuesday, lauded the generosity of U.S. residents.

"The amount given by ordinary Americans is 10 times what is given by Warren Buffett and Bill Gates," said Bishop.


The Economist's Matthew Bishop joins Morning Joe to discuss Giving Tuesday Click image to view Matthew Bishop's appearance on Morning Joe

Donation tax deduction issues: Of course, those rich guys and their peers get a lot in return from the tax code for their gifts.

The tax deduction for donations, however, probably doesn't matter that much, according to Bishop.

Bishop said that Buffett, whom the writer interviewed for his book and who probably saves millions each year thanks to the charitable deduction, said that the tax code makes absolutely no difference whatsoever to his giving.

"The deduction really affects those earning above $70,000 and below $250,000," said Bishop. "Evidence shows that it makes a small difference, but not as big a difference as you might think because most people give because they care about a particular cause. The amount of money [donated] may be affected a bit by what your accountant tells you, but generally you're giving because you want to help that local community group or that village in Africa or whatever."

And since most people — around 60 percent, according to Internal Revenue Service filing figures — don't itemize, they don't get the benefit of the charitable tax deduction anyway.

Fiscal cliff donation component: Of course, all the tax data in the world, Buffett's assurance he'll give regardless and Bishop's observations on generosity aren't going to keep the philanthropic community from worrying as limits on tax deductions are part of the fiscal cliff discussions.

I expect the nonprofit community to aggressively argue for keeping the charitable deduction in place as is.

Buffett notwithstanding, many nonprofits say they depend on rich donors who are acutely aware of the tax break when they make their giving decisions.

So if there is some limit placed on deductions claimed by wealthier
taxpayers, most charities would like to see charitable donations
exempted from the cap.

Today, however, regardless of whether the tax break applies to you, #GivingTuesday folks hope you'll make a charitable gift and help the group turn their idea into an annual post-Thanksgiving giving event.

You also might find these items of interest:

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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