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How Much Do U.S. Taxpayers Give to Charity?

How Much Do U.S. Taxpayers Give to Charity?

The charitable contribution deduction has been one of the most widely used and cost-effective tax reductions available to U.S. taxpayers for many years, with nearly 37 million taxpayers taking advantage of it in a recent fiscal year.

However, a key provision in the Jobs and Tax Cuts Act could fundamentally change that. Although the deduction itself has been maintained, far fewer Americans will likely be able to deduct generous charitable contributions in the future. Here's how much Americans give to charities and how it might be affected in the future.


The Charitable Contributions of the Average American

A total of 36.95 million taxpayers claimed a deduction for charitable donations made in the fiscal year 2016, the most recent year for which the data is available. And just to be clear, these are the tax returns that Americans filed in 2017.

The average charitable deduction from those nearly 37 million tax returns was $5,508. This amount was a little bit higher than the average deduction of $5,491 the previous year.


By income level

Charitable contributions vary widely by income level, so here's how much the average American contributes to charity by income level:

Income range (AGI)

Average charitable contributions deduction

Under $15,000

$1,471

$15,000-$29,999

$2,525

$30,000-$49,999

$2,871

$50,000-$99,999

$3,296

$100,000-$199,999

$4,245

$200,000-$249,999

$5,472

$250,000 or more

$21,364

Data source: IRS 2016 preliminary data. Values are rounded to the nearest dollar.


Why is it important to know?

While it's definitely interesting to see how much money Americans donate to charities, this data also has practical applications.

Here's a tax fact that many Americans don't realize: The IRS knows how much an average person gives to charity at their income level, pays mortgage interest, and spends on medical expenses. If your deductions in any area are significantly above average, this could be a red flag for the IRS and increase your chances of facing an audit. In other words, if you earn $75,000 and claim a charitable deduction of $6,000 (almost double your average income), it could trigger a more detailed review from the IRS.

To be clear, you must receive every penny of the charitable deductions you are entitled to. Be prepared to back up your claims, especially if yours might come to the attention of the IRS.


A Huge Caveat

It is imperative to note that this data only includes taxpayers who made charitable donations and also chose to itemize deductions on their tax returns.

The charitable donation deduction is only available to people who itemize and affects only about 25% of the population each year. Many taxpayers who do not itemize have certainly contributed to charity; however, there is no way of knowing how much they give.


How might charitable contributions change as a result of tax reform?

The biggest change to the Tax Cuts and Jobs Act that could affect charitable donations is nearly double the standard deduction to $12,000 for single taxpayers and $24,000 for married taxpayers filing joint taxes.

Here is why it's so important. We have already mentioned that about a quarter of taxpayers itemize their deductions each year. Well, the higher standard deduction should significantly reduce that number. Early estimates suggest that only 5% of taxpayers will benefit from itemizing their deductions in the future.

For this reason, many Americans will not qualify for a charitable deduction, and those who do will generally be those who donate the most money. And it is also possible that charitable contributions will decrease slightly; After all, tax exemptions aren't the only reason Americans donate to charity, but it is certainly an incentive in many cases.


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