"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.
The CARES Act, passed in 2020, provided a one-time deduction for qualified giving in 2020 that was eventually extending into tax year 2021. Individuals can deduct up to $300 in giving against their adjusted gross income, and married couples filing jointly can write off up to $600 over and above the standard deduction. Since 90% of taxpayers take only the standard deduction, this special provision grants a little more tax relief for doing good this year. Check with your financial advisor or tax professional for more information.
Yet despite the encouraging surge in generosity throughout 2020 and far this year, there is still no shortage of needs this season. In particular, many local families who were affected by COVID-19 have yet to recover from the financial damage caused by the virus, while much of the targeted aid funding has run out. If you have not yet completed your giving or are motivated to do a little extra this year, there are many worthy local causes that would welcome a special Christmas gift. The Times Free Press has a page dedicated to local nonprofit organizations in the Tennessee Valley which you can review at timesfreepress.com/nonprofits.
If you are still looking for the perfect gift but running out of time, consider the idea of "charitable gifting." Fidelity Charitable, a donor-advised foundation sponsored by Fidelity Investments, commissioned a study with a fascinating and encouraging outcome: 59% of Americans responded that they would rather receive a donation to charity in their name than a gift for themselves this year. Food for thought, and maybe the return line at Walmart will be a little shorter this year as well.
And even if money is tight, time is valuable. According to the National Philanthropic Trust, 30% of Americans volunteer their time and talents each year to worthy causes, totaling nearly 9 billion hours. Giving a few hours to make a difference can often mean just as much as stroking a check.
We as Americans have much to be thankful for. Christmas is a wonderful time to share some of our bounty with others.
Wishing everyone a joyful and generous holiday season.
"Those who are happiest are those who do the most for others." – Booker T. Washington
Christopher A. Hopkins is a Chartered Financial Analyst in Chattanooga.