“We make a living by what we get, but we make a life by what we give.” – Winston Churchill
Despite the disruption and uncertainty of the COVID-19 pandemic, Americans stepped up their charitable giving to a record high of $471 billion in 2020. That number represents a 5.1% increase over 2019, a year of strong economic growth which itself had set a new high-water mark. And so far, the trends in 2021 look positive thanks to a strong stock market recovery and recognition by many that some of our fellow citizens are still struggling to catch up.
The holiday season is the perfect time to reflect and share with others, and this year the IRS is lending an additional incentive: an additional tax deduction for gifting in addition to the standard deduction that 90% of Americans claim on their returns.
By most measures, America is the most generous nation on earth. The international Charities Aid Foundation has consistently ranked the United States No. 1 in its annual survey of giving by nations around the globe, averaging 2.1% of disposable income. By far, individuals and households make up the lion’s share of charity in the United States, comprising 69% of all giving according to Giving USA’s 2020 annual report. Corporate philanthropy accounts for just 4% of annual charitable contributions and actually declined by 6.1% in 2020. Foundations contributed 19% of all philanthropic giving, much of which came from individual Americans as well.
Perhaps unsurprisingly, December is traditionally the strongest month for contributions to charitable causes, whether because of the Christmas spirit or last-minute tax planning, but 2021 offers a special incentive for additional generosity courtesy of a temporary provision in the tax code.