How Much Can I or Should I Donate to Charity?

Giving to a charitable organization is a personal decision that can help you make an impact for a cause or in your community while sometimes also providing for some financial advantages too.

This article will explore common questions that arise when considering a gift to a charity and non-profit, our hope is at the end of it, you’ll have some tools to evaluate your options and feel more comfortable donating when you’re ready.

How much of my budget should go to charity in 2020?

Americans gave an estimated $427.71 billion to charity in 2018, Giving USA’s annual philanthropy report found this year, with total giving increasing 0.7% in current dollars over the previous year but decreasing 1.7% adjusting for inflation.

The report, a joint effort by the Giving USA Foundation and Indiana University’s Lilly Family School of Philanthropy, highlighted a “complex” giving environment shaped by tax-policy changes and stock-market volatility. (Source: https://www.marketwatch.com/story/how-much-money-should-you-be-giving-to-charity-2018-09-24)

While the overall range of giving varies greatly based on how the economy affects a person’s ability to give, many households do give to charity in some fashion each year. In fact, 65 percent of households in the United States donate to charity. (money.howstuffworks.com)

With the 2018 tax-code changes to how charitable donations affect how your ability to deduct them from your tax liability, the choice to give may have less to do with how much this affects your taxes as it does with your ability to give based on your available income.

On average and based upon their income, Americans give anywhere from 2-11% of their income to charity. These percentages vary greatly given the difference in standard of living costs and wages that people across the entire country make.

Source: IRS Preliminary Data for Tax Years 2017
(Source: https://www.northfinancialadvisors.com/how-much-should-i-donate-to-charity/)

With this in mind, it’s a good general rule to follow that you give based on what you’re comfortable with and using funds that do not need to be allocated toward other more pressing or urgent needs that are required for you to maintain your standard of living.

It’s an important consideration to make sure all of your bills, expenses, debts, and basic needs are addressed before contributing what remains in your available funds. (source: https://money.howstuffworks.com/personal-finance/budgeting/how-much-budget-to-charity.htm)

To make your life easier, Charity Navigator, a trusted source for verifying and approving non-profits and charitable organizations that are in good standing, has developed a tool to help you calculate how much you could give based on income and the potential tax savings: https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=40.

As always, tools like the above are a good place to start, but you should always consult with a financial professional or review your financial situation further prior to making a gift to ensure you are making the best choice for your circumstances.

Who Gives Most to Charity?

As seen in the IRS data table above, those who made less than $100,000 a year were giving a larger proportion of their income to charity than those in the higher income brackets until we move into incomes higher than $100,000. When considering the dollar amount, those with higher incomes gave more money by virtue of a larger income and its proportional value to their gift.

Data tables such as the one above the IRS also may not account for the variety of financial situations and structures that exist where those in a higher income bracket may offset their tax liability through different types of donation approaches in a given year.

While it can become easy to be concerned about how much someone else is giving relative to your potential donation, it’s important as noted in a Fast Company article by Pavithra Mohan that you shouldn’t give more than is comfortable for your situation allows. (source: https://www.fastcompany.com/90333611/the-psychology-of-who-gives-to-charity-and-how-much)

To learn more about how to evaluate different charitable organizations prior to donate, check out our post on the benefits of donating to charity.