All You Need to Know about Decrease in Itemized Charitable Deductions

When it comes to philanthropic trends, recent media reports have left many fundraising professionals lost in the weeds and confused by misleading analysis. So, I’m going to give you the most important insights about individual giving that you need to know now along with three practical tips.

First, here’s some quick background. Overall, charitable giving reached an historic high in 2018 with $427.71 billion contributed, according to Giving USA 2019. Despite this great news, individual giving, excluding bequests, fell 1.1 percent to $292.02 billion. There are many reasons for the slight dip, which you can read about in one of my prior posts. One of the factors that may have played a role is the new tax code. With it, we saw a dramatic increase in the number of taxpayers taking the standard deduction and a drop in the number choosing to itemize their deductions.

That brings us to a big takeaway that almost no one is talking about:

The charitable tax-deduction is not a substitute for a solid case for support.

This was true prior to passage of the Tax Cut and Jobs Act; it’s even more true today. Before the new tax code went into effect, less than one-third of taxpayers itemized their returns, and less than one-quarter of taxpayers claimed a charitable tax-deduction. Now, only about 10 percent itemize and 8.5 percent claim a charitable deduction, according to the Tax Policy Center. To put things another way, for the majority of donors, tax issues were never a viable consideration when it came to charitable giving. Today, tax considerations are an issue for even fewer people.

This all means that the classic, but foolish, year-end appeals touting the tax benefit of giving before December 31 are even more irrelevant than ever. Furthermore, it means that the relevance of the idea of year-end giving itself has been diminished. If someone doesn’t need to do year-end tax planning, why would they need to wait until year-end to donate? The reality is most people can give at any time with the same effect on their finances.

In light of all of this, here are the three things you should do:

How to Stop Offending Your Women Donors

Just days ago, T. Clay Buck, CFRE, asked a survey question on Twitter:

An informal poll for any who identify as female and also contribute philanthropically. If you are the primary gift giver and are in a relationship, have you ever been listed secondarily or as ‘Mr. and Mrs.’ even though you made the gift?”

While far from being a scientific study, Buck’s poll found that 82 percent of the 68 respondents answered “Yes,” indicating they were recognized inappropriately. Despite not being statistically reliable, the results are sufficiently striking to indicate that the nonprofit sector has a donor-recognition problem.

I’m not surprised. This is the flip side of a problem I’ve talked about on many occasions. Charities often treat women as second-class donor prospects. Now, we see that some nonprofits also treat women as second-class donors.

These problems might be due to carelessness. Or, it could be that some fundraisers are gender biased. Regardless, the way in which some charities treat female prospects and donors is offensive. It’s also stupid. The reality is that women are more philanthropic, in many respects, than men are. Therefore, charities would be wise to immediately address the way they engage with female prospects and donors.

Although I’ve written in the past about gender differences when it comes to philanthropy, I want to highlight some insights from professionally conducted, valid research that underscore the importance of working more effectively with prospects and donors who are women.

A whitepaper from Optimy, Women in Philanthropy, reveals:

• Women make 64% of charitable donations.
• Women donate 3.5% of their wealth, on average, while men contribute 1.5%.
• Women account for 45% of American millionaires.
• Women will control 2/3 of the total American wealth by 2030.
• Women are also playing a greater role in philanthropy because of the growth in Giving Circles. Of the 706 Giving Circles reviewed, women led 640.
• Women made up 77% of foundation professional staff in 2015.

For more insights from Optimy about the role of women in philanthropy and a look at what motivates female donors, download the FREE report by clicking here.

When it comes to planned giving, women are critically important according to a Fidelity Charitable Gift Fund study I first cited in my book, Donor-Centered Planned Gift Marketing:

• High-income women (those with an annual household income of $150,000 or more) demonstrate a high-level of sophistication in their giving by seeking expert advice.
• High-income women are more likely to use innovative giving vehicles such as donor-advised funds and charitable remainder trusts. 16% of high-income women have or use a donor-advised fund, charitable remainder trust, or private foundation, versus 10% of high-income men.
• 7% of high-income women made charitable gifts using securities, versus 3% of high-income men.

Yes, both men and women are valuable contributors to charities who we should cherish. Unfortunately, far too many charities fail to fully appreciate the vital role that women play when it comes to philanthropy. Women are often ignored as solid donor prospects deserving of attention. When women do give, they are often denied the respect and recognition they deserve as Buck’s poll suggests.

Here are some questions to consider as you review your own organization’s donor recognition procedures:

Do Not Fall for Newsweek’s Fake News!

You might have seen it recently. Sophie Penney, PhD, President of i5 Fundraising, saw it and then asked me what I thought. So, thank you for the question, Sophie; here goes…

Newsweek posted an article with this headline: “Trump Tax Plan Leads to $54 Billion Decline in Charitable Giving.”

There’s only one problem: IT IS NOT TRUE!

Shockingly, not even the body of the article supports the headline. Instead, the writer talks briefly about a $54 billion drop in itemized donations NOT a $54 billion drop in giving. This does NOT mean there was a $54 billion drop in actual giving. With fewer people itemizing their taxes, of course there would be fewer itemized donations. However, that does not mean fewer donations. Many donors will continue to give and continue to give generously despite not being able to itemize. By the way, the writer provided no source for the $54 billion figure.

The article furthers its doom-and-gloom theme by asserting that there was a 1.7 percent decline in overall charitable giving. However, the writer did not mention that that figure was for inflation-adjusted dollars. In real dollars, giving actually went up $2.97 billion (0.7 percent) between 2017 and 2018, and now stands at $427.71 billion, the highest level of all time, according to Giving USA 2019. Even if we look at inflation-adjusted dollars, giving in 2018 was the second highest in recorded history. Not bad.

If we want to understand the current philanthropy environment, we need to have an honest conversation using real information. In a previous post, I identified several factors affecting charitable giving: