Is the Charitable Deduction in jeopardy?

What motivates your donors to give is often based on their own desire to participate in the mission of your organization. They see value in what you do and share your passion, but we would be naive to ignore the financial incentive to give. The charitable deduction as a motivation can be seen in the timing of gifts: More than one-third of all charitable giving happens in the last three months of the year, with December leading the way with almost 18% of annual fundraising. We see this trending more prevalent in ministries versus churches, indicating that perhaps donors are not as dependent upon the tax benefit when giving to a church. 

What would happen if the charitable deduction was reduced or removed; would your donors continue to give?

A proposal by the Obama administration to limit or cap the deduction that can be taken for charitable gifts has been a part of budget discussions for a couple of years now. The cap would generate roughly $321 billion in additional revenue, but charities argue that the limit could make a significant impact on donations. Some estimates project that donations would decrease by as much as $7 billion per year. 

While the debate continues and changes to the charitable deduction are still on the table, the expectation is that the charitable deduction will be left intact, at least for 2014.

“There’s zero percent chance any significant tax reform will happen this year,” says Andrew Schulz, executive vice president of Foundation Source, a group that advises private foundations. Full Story.

Another concern facing charities is the phaseout of itemized deductions starting in 2013 for top earners. Although again, the expectation is that this will not have a materially negative impact on giving.

Many in the charitable sector view this phaseout as somehow taking back some of the hard-earned victory to preserve the charitable deduction. Charitable gift planners are concerned that the phaseout will reduce tax incentives for charitable gifts and therefore result in reduced giving. However, for most donors this is simply not the case. Full Story.

So, what can you do? Certainly participating in the law making process by voting and contacting your local government is important, but additionally you can focus on ensuring that your donors have more than just a financial reason to donate. Share with your donors your vision, your passion and more importantly, share your successes.  When possible, give them a look inside the lives that you have impacted.

Want to dig deeper? Here are a few related links you might be interested in:

The Charitable Deduction. Click here.

The Future of the Charitable Deduction. Click here.

Charities Unite to Defend Deductions. Click here.