Awhile back I got a great question by email about the tax benefits for charitable giving:

Are you aware of any data or where one might find data, on comparing how much people donate when tax deduction is and isn’t available….that is, data that would quantify the impact tax incentives have on giving?

~ Jane Bowers

A research study from the Urban Institute examines the impact of tax credits (which is different from tax deductions) using data from 1998-2000: Charitable Tax Credits Boon or Bust for Nonprofits?

The most recent data available from the Arizona Department of Revenue show that the tax credit seems to have added some new money to the nonprofit sector, although the downtrend in the economy confounds the picture . In 1998, 2,856 filers claimed $475,438 in tax credits. One year later, the numbers increased (6,712 filers claimed $1,161,162 in tax credits).

For the wealthy, tax benefits seem to be a significant factor in giving. This quote comes from a Portfolio.com article, Tax-Avoidance Trifecta:

For high-income taxpayers seeking to shelter income, philanthropy can be the gift that keeps on giving. Instead of writing checks, though, savvy investors are signing over appreciated securities.

In my experience the majority of donors, those not in high income brackets, give to causes they believe in and tax benefits are secondary. Telling someone that a donation is tax deductible doesn’t go very far in convincing them to make a donation.  Most charities offer this benefit so never think that this alone will convince someone.

Many 501c4 organizations, such as those that participate in lobbying activities, do not offer tax benefits to donors and they still manage to raise money for their causes.

What do you think about tax benefits for charitable giving? Do you know of other research papers on this topic? Post a comment below.

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Posted on 07 April 2010

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