In the United States, the federal tax deduction for charitable giving was created in 1917. The idea was that non-profit organizations provide tangible benefits to society, and donations should be encouraged. The tax deduction effectively lowers the cost of donations to worthy causes through a public subsidy.
Our tax system is in need of reform so that loopholes like the ones mentioned in the article are closed to make sure the real intent of the law is realized.
It's still possible for ordinary people to achieve a tax benefit through charitable giving. That is, if you are retired and have a significant amount of money in an IRA. In that case directed distributions aren't taxed. So for example if your Required Minimum Distribution is $25,000 and you geve $7,500 in directed distributors, you pay taxes on the difference - in this case $17,500 - and can still take the standard deduction. Moreover, the reduced amount is used to determine how much of your Social Security benefit is taxed; a further saving. If you are 70 1/2 or older, It's a no-brainer.
Thanks Judd for all you do to keep us informed!! And for highlighting such a wonderful organization which I hadn’t heard about. Just donated to this very worthy cause. Now if only the GOP faction of Congress & state legislatures would actually put their “Christian values” into practice & work to pass legislation to meaningfully help those in poverty.
Judd, great reporting as always, but you also did a great job explaining this in a way anyone could understand. I feel like in the USA, rich people are like "I really don't wanna pay taxes" and our government is like "Okay."
This is so appropriate on Giving Tuesday. I first learned of this, while I worked for a family foundation, from seeing how local philanthropists used a donor-advised fund to support the issues they care about.
I often mention Ms Scott and tell people to "Donate like a girl". Take a look at Tom Brady's idea of charitable giving with the Kennedy-run charity to which he lends his name (and charges them for it).
I thought the act of giving was supposed to be its own reward. Evidently, if you're rich, it comes with the opportunity for a sizable tax break as well. How magnanimous.
I find that manipulation of “tax deductible” money earmarked for Churches and the NRA is especially reprehensible. Churches and their groups, like Christian Nationalists should lose their tax exemption the moment they breach the separation of church and State. Period.
Remember the mortgage- banking fiasco of 2007? It wasn’t just lumping real estate into junk, high risk stocks--there were individuals who claimed to represent “churches” (simply download a form declaring yourself a church leader), then taking out “home improvement loans” (piling debt on the mortgage) without actually using the money to add value to the property . . . Plus, renting said properties for more tax-deductible skimming. All of this was made possible by the convoluted tax system.
Another gimmick is similar to the one used by the NRA: Declare your entity as educational to avoid taxes. I believe tRump got caught doing this; the NRA continues to utilize this bogus exemption.
If I were an accountant, I’m sure I could describe any number of BS schemes to avoid taxes in an “oh, so, charitable way.” The Koch-designed manipulations would be fertile proving ground and one more reason there should be an investigation of the Organized Crime Syndicate aka the RNC.
Most people should stop agonizing over "is this deductible?" and give according to their values and understanding. The "non-profit" designation is meaningless in most contexts.
This is a very important issue! Thank you for highlighting it. Of course, this follows the trend of neoliberal privatization of everything and reducing everything to individual choice (for those with enough money to choose), but I think that politicians need to shift their thinking to implement policies that encourage the most people possible to engage with their communities on a local or national scale. This is the only way we can build a strong democracy.
Nonprofit Quarterly has reported on a lot of what you mentioned and they noted a decline in individual giving last year which follows a long-term downward trend of individual giving (https://nonprofitquarterly.org/why-philanthropic-giving-declined-in-2022/). This is likely both a symptom and a cause of people being disconnected from their communities and disillusioned with public institutions. The decline in individual giving is unfortunate because it contributes to the further concentration of philanthropy, with fewer and fewer people having influence over the direction of nonprofits and foundation giving. Foundations already function in an antidemocratic way, and a reduction in smaller donor giving will only reduce the small influence such individuals have, leaving every choice to the wealthy (https://nonprofitquarterly.org/to-support-democracy-foundations-must-practice-democracy/)
This report immediately brings to mind the conservative organization “Donors Trust” which is one of the most prominent funnels for MAGA money providers who are actively working to ensure that Project 2025 succeeds.
The author is wrong about gifts of assets other than cash and misleading about donor advised funds.
Federal law changed in 1986 for gifts of non cash assets. Since then, first, a current, independent, qualified appraisal of the asset to establish its value is required if the donor wants a tax deduction. The donor pays for this appraisal. Second, the asset must be related to the charitable purpose of the organization to which it is being donated. So, for example, art cannot be given to a donor advised fund (DAF) because the DAF is neither a museum nor a school which uses works of art for educational purposes.
Cryptocurrency is treated like other financial assets, such as stocks. By law, the value of the gift is set as the mean price on the legal date of the gift.
Regarding donors' use of DAFs, it is not necessarily very affluent people who benefit from this opportunity but rather those whose income is highly variable. An example is a small business owner who is charitably minded may have an exceptionally good year. They don't immediately know where to make their gifts, but want their extra profit available for this purpose. They set up a DAF with a community foundation or a firm such as Fidelity so that they can take the deduction in the year the profit was made but then have more time to make thoughtful decisions about where their gifts will go.
A side note: Fidelity first offered DAFs because the then-chairman was highly philanthropic himself. He regarded this as a way to encourage those who invested with Fidelity to be more charitable as well.
Community foundations offer DAFs to attract donors to give back to the community in addition to other charitable purposes.
Please fact check these articles before printing them.
When it comes to money....! Looks like we could learn a great deal from how Mackenzie Scott achieves her charitable intentions. Is there any public information on how she went about her giving?
It appears that the Hiltons and Musk engrave how to be selfish as subtitles in their lives...no matter what!
Our tax system is in need of reform so that loopholes like the ones mentioned in the article are closed to make sure the real intent of the law is realized.
It's still possible for ordinary people to achieve a tax benefit through charitable giving. That is, if you are retired and have a significant amount of money in an IRA. In that case directed distributions aren't taxed. So for example if your Required Minimum Distribution is $25,000 and you geve $7,500 in directed distributors, you pay taxes on the difference - in this case $17,500 - and can still take the standard deduction. Moreover, the reduced amount is used to determine how much of your Social Security benefit is taxed; a further saving. If you are 70 1/2 or older, It's a no-brainer.
Thanks Judd for all you do to keep us informed!! And for highlighting such a wonderful organization which I hadn’t heard about. Just donated to this very worthy cause. Now if only the GOP faction of Congress & state legislatures would actually put their “Christian values” into practice & work to pass legislation to meaningfully help those in poverty.
Judd, great reporting as always, but you also did a great job explaining this in a way anyone could understand. I feel like in the USA, rich people are like "I really don't wanna pay taxes" and our government is like "Okay."
This is so appropriate on Giving Tuesday. I first learned of this, while I worked for a family foundation, from seeing how local philanthropists used a donor-advised fund to support the issues they care about.
NewsFlash! Snakes don't care about you. Just in time for Xmas too!
Seriously, this is good report Judd.
PI always has information you can actually point to and use.
Talk about welfare queens... The uber rich are morally bankrupt. Eat the rich, indeed. You'd need a lot of tenderizer and sugar to digest them.
I often mention Ms Scott and tell people to "Donate like a girl". Take a look at Tom Brady's idea of charitable giving with the Kennedy-run charity to which he lends his name (and charges them for it).
I thought the act of giving was supposed to be its own reward. Evidently, if you're rich, it comes with the opportunity for a sizable tax break as well. How magnanimous.
I find that manipulation of “tax deductible” money earmarked for Churches and the NRA is especially reprehensible. Churches and their groups, like Christian Nationalists should lose their tax exemption the moment they breach the separation of church and State. Period.
Remember the mortgage- banking fiasco of 2007? It wasn’t just lumping real estate into junk, high risk stocks--there were individuals who claimed to represent “churches” (simply download a form declaring yourself a church leader), then taking out “home improvement loans” (piling debt on the mortgage) without actually using the money to add value to the property . . . Plus, renting said properties for more tax-deductible skimming. All of this was made possible by the convoluted tax system.
Another gimmick is similar to the one used by the NRA: Declare your entity as educational to avoid taxes. I believe tRump got caught doing this; the NRA continues to utilize this bogus exemption.
If I were an accountant, I’m sure I could describe any number of BS schemes to avoid taxes in an “oh, so, charitable way.” The Koch-designed manipulations would be fertile proving ground and one more reason there should be an investigation of the Organized Crime Syndicate aka the RNC.
Most people should stop agonizing over "is this deductible?" and give according to their values and understanding. The "non-profit" designation is meaningless in most contexts.
This is a very important issue! Thank you for highlighting it. Of course, this follows the trend of neoliberal privatization of everything and reducing everything to individual choice (for those with enough money to choose), but I think that politicians need to shift their thinking to implement policies that encourage the most people possible to engage with their communities on a local or national scale. This is the only way we can build a strong democracy.
Nonprofit Quarterly has reported on a lot of what you mentioned and they noted a decline in individual giving last year which follows a long-term downward trend of individual giving (https://nonprofitquarterly.org/why-philanthropic-giving-declined-in-2022/). This is likely both a symptom and a cause of people being disconnected from their communities and disillusioned with public institutions. The decline in individual giving is unfortunate because it contributes to the further concentration of philanthropy, with fewer and fewer people having influence over the direction of nonprofits and foundation giving. Foundations already function in an antidemocratic way, and a reduction in smaller donor giving will only reduce the small influence such individuals have, leaving every choice to the wealthy (https://nonprofitquarterly.org/to-support-democracy-foundations-must-practice-democracy/)
WOW I have been so naive! Thank you for this very timely information!
This report immediately brings to mind the conservative organization “Donors Trust” which is one of the most prominent funnels for MAGA money providers who are actively working to ensure that Project 2025 succeeds.
The author is wrong about gifts of assets other than cash and misleading about donor advised funds.
Federal law changed in 1986 for gifts of non cash assets. Since then, first, a current, independent, qualified appraisal of the asset to establish its value is required if the donor wants a tax deduction. The donor pays for this appraisal. Second, the asset must be related to the charitable purpose of the organization to which it is being donated. So, for example, art cannot be given to a donor advised fund (DAF) because the DAF is neither a museum nor a school which uses works of art for educational purposes.
Cryptocurrency is treated like other financial assets, such as stocks. By law, the value of the gift is set as the mean price on the legal date of the gift.
Regarding donors' use of DAFs, it is not necessarily very affluent people who benefit from this opportunity but rather those whose income is highly variable. An example is a small business owner who is charitably minded may have an exceptionally good year. They don't immediately know where to make their gifts, but want their extra profit available for this purpose. They set up a DAF with a community foundation or a firm such as Fidelity so that they can take the deduction in the year the profit was made but then have more time to make thoughtful decisions about where their gifts will go.
A side note: Fidelity first offered DAFs because the then-chairman was highly philanthropic himself. He regarded this as a way to encourage those who invested with Fidelity to be more charitable as well.
Community foundations offer DAFs to attract donors to give back to the community in addition to other charitable purposes.
Please fact check these articles before printing them.
When it comes to money....! Looks like we could learn a great deal from how Mackenzie Scott achieves her charitable intentions. Is there any public information on how she went about her giving?
It appears that the Hiltons and Musk engrave how to be selfish as subtitles in their lives...no matter what!