The Season of Giving: Rutgers Researcher Unwraps the Facts on Charitable Donations

By Tom McLaughlin

As the clock ticks toward the end of the year, research shows that people are more inclined to make charitable donations. So does this mean that people are more likely to give in the holiday spirit, to seek a tax deduction, or perhaps both?

Michael Hayes, an assistant professor of public policy and administration at Rutgers University–Camden, offers his two cents on what makes this the season of giving.

So let’s unwrap the facts. When do nonprofit organizations receive the majority of their donations?

Nonprofit organizations receive donations throughout the year. However, it appears that the majority of their donations are received between October and December. In a recent study conducted by GuideStar, 50.5 percent of surveyed nonprofit organizations said that received the majority of their contributions during this time period.

Michael Hayes

What do you think accounts for this uptick in giving?

There are at least three possible reasons for this finding. First off, during the last quarter of the year, individuals could be more charitable because of the holidays. Secondly, nonprofits organizations focus a lot of time and resources in promoting charitable donations during this time of the year. For example, on Nov. 29, the entire world celebrates #GivingTuesday to encourage charitable giving.

Lastly, individuals may wait until the end of the year to make their charitable donations for tax purposes. By the end of the fiscal year, an individual will likely have a better idea of how much they are willing and able to donate, in order to maximize the tax benefit associated with their charitable donation. Individuals must make their charitable donations before the end of the December 2016 in order to get the tax deduction in Tax Year 2016.

So then what do you think the biggest reason is – are people looking out more for others or themselves?

While the tax benefit for charitable donations is a factor, I don’t believe it is the main factor. For example, there are plenty of households who make donations, even though they do not receive a tax benefit. According to the IRS, households with adjusted gross income between $45,000 and $50,000 donate 4 percent of their income compared to 2.5 percent for households with adjusted gross income between $250,000 and $500,000. The former is less likely to itemize their deductions and would not receive a tax benefit from the donations.

The satisfaction of giving to others is likely the primary driver for why individuals donate, while the tax deduction serves as a nice bonus.

As I understand it, not everyone is eligible for tax deductions for making charitable donations. So who qualifies?

Only individuals who choose to itemize their tax deductions are eligible. In other words, households that choose to take the standard deduction are not eligible. According to the IRS, currently roughly 30 percent of households choose to itemize their deductions.

Okay, I’m ready to give. So then what qualifies as a charitable contribution?

The charitable contribution must be given to a 501(c)(3) exempt organization. Generally, these are nonprofit organizations focusing on religious, scientific, public safety, or educational activities. The IRS provides a helpful check tool that provides a list of qualified organizations. Any contribution to an individual would not be considered a qualifying charitable contribution.

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