Unveiling the Impact of Charitable Giving

Compared to residents of other wealthy nations, Americans are more likely to give their time and money to help others. In 2023, the United States ranked ninth in per capita gross domestic product (GDP) but fifth on the World Giving Index rankings.

Polling shows that Americans trust nonprofits more than government or business, but they generally know little about charitable giving and philanthropy, such as how these organizations distribute their funds and the rules that govern their activities.

Giving money to charity can provide personal and financial benefits to donors and be a part of the legacy they leave behind. If you are thinking about making a charitable gift—either now or when you pass away—there are some things to be aware of so you can make the most of your donation.

Fewer Americans Donating to Charity

Total charitable giving in the United States dropped 10.5 percent from 2021 to 2022, according to the report conducted by Giving USA 2023. As a percentage of disposable personal income, giving declined to a 40-year low of 1.7 percent. Overall, the number of US households that annually give to charity declined from 66 percent in 2000 to less than 50 percent in 2018.

Some statistics paint a rosier picture of American generosity. Adjusting for inflation, charitable giving by Americans was seven times greater in 2016 than it was in 1954. US charitable giving as a proportion of GDP has also increased slightly over this period but has remained at around 2 percent for decades.

Americans grew more generous during the pandemic, with 2020 and 2021 donations both topping 2019 giving levels. A recent Gallup poll reveals that 81 percent of Americans donated money to charity over the past year, with the percentage of those giving rising in proportion to household income. Around 90 percent of households making $100,000 or more give money to charity each year.

Where Americans are Donating

There are approximately 1.5 million charitable organizations in the United States. Generally, the Internal Revenue Service (IRS) defines public charity as any organization that receives a substantial portion of its income from public donations.

Many—but not all—charities qualify as tax-exempt under IRS rules. The 501(c)(3) tax exemption, known as the charitable tax exemption, allows qualified organizations to avoid paying federal corporate and income taxes for most revenue sources.

Designated 501(c)(3) charities are also able to solicit tax-deductible contributions that allow donors to deduct money given to these organizations on their tax returns. A gift made to a qualified tax-exempt organization as part of an estate plan can help to reduce estate taxes as well.

The nation’s top 100 charities received more than $61 billion in private donations in 2023. They include Feeding America, United Way, St. Jude Children’s Hospital, Salvation Army, Habitat for Humanity, Goodwill, YMCA, and the Boys & Girls Clubs of America.

Get Estate Planning and Tax Advice Before Giving

It is not too late to make philanthropy a part of your legacy, but whether you are new to charitable giving or want to step up your gifts, there are strategies to follow that can increase the value of your charitable efforts.

However you plan to give and whoever you plan to give to, the rules around charities can be complicated and options abound. For professional advice about giving to charities, choosing what and where to donate, and the different gifting strategies that are available, schedule a consultation with our estate planning attorneys at 703-383-9000.