It’s not just about growing the beard out
I participate in No-Shave November because I enjoy growing out the beard and donating money to a cause I believe in. Do you see how I didn’t mention anything about tax benefits? That’s because it’s a bit more complicated than “if you donate you deduct it.”
No-Shave November is all about fighting Cancer in males and Cancer has affected my immediate and distant family. It’s a horrible disease. Clearly theres a bit more psychology behind why I participate.
And that is what we’re going to talk about today. The surprising Psychology of Giving and if we really do get tax benefits from donating to a non-profit. This is just in time for Thanksgiving so you can actually correct your family members when they just randomly share you can just “WrItE iT oFf.”
The top reason why people give
This really surprised me. I thought it was due to religion or tax benefit, but I was wrong. Over 85% of people that give money (not just planned giving) give because they’re asked to. Now there are plenty of other reasons below, but at the end of the day we will give if we are just prodded a bit.
But wait theres more!
The motivation behind giving (if someone is asked or not), falls into a few categories…
1) Social Dynamics: Giving to a cause or organization because it matters to someone they care about. This one is a primary reason I give to No-Shave November since Cancer has affected my entire family since I was a child.
2) Altruism: When you believe it’s important to help people in need. This is a powerful one giving throughout the year especially for the GoFundMe’s for people who lose their home, are impacted by regional conflicts, etc.
3) Egoism: Just flat out truth that some give to see personal benefit. To feel good about themselves or look good to others. This is also where the tax benefit falls and to be honest, I do donate in part to the tax benefit.
Psychologists have also found that there can be a few things that block that feel good feeling and reduce the chance that someone will give.
1) Trust: Plenty of people including myself don’t know or trust the money given will be used for the purposes that it’s intended for. This is a problem I have with tithing personally, but that’s an entirely different conversation for another day. It helps to know that the money you give is clearly going to the intended spot.
2) Impact: Some problems are really big like world hunger. Some non-profits don’t do the best job at sharing how to make a really big problem a little smaller and digestible (why do I always bring it back to food?) for the regular givers.
The Tax Benefits and how it’s a bit tricky
I’ll get straight to it – If your itemized deductions are less than the annual standard deduction than it might not be worth it to take the itemized deduction. I’m no CPA so please do your homework and check with one before making that call.
Essentially, if you’re giving more than the amounts above then it does become more beneficial to go with an itemized deduction. This is where learning about what you can count as a donation becomes very helpful. Over years of W2 income and time with a few different CPAs I’ve had to learn this the hard way and I’m STILL learning to this day.
Here are some important things to remember when pulling out the check book for a little philanthropy…
1) It only counts if it’s going to a tax exempt organization. A learning experience for me was that an organization can be a nonprofit, but not a tax exempt organization. Easy way to check that is with the IRS Exempt Organizations Select Check tool. Bonus Note: family and friends gifts don’t count.
2) Keep your receipts for the end of the year. Someone says you want the receipt and you says YES. You’ll need extra documentation for non cash donations like clothes over $500 or cash/property donations over $250.
3) You can deduct the expenses for volunteering. The IRS doesn’t let you deduct the time because let’s be honest, we’re all going to value our time a lot hire than our real hourly rate. The expenses must directly and solely connected to your volunteer work.
I could do better
While I do give money and time away throughout the year it’s no where near what I could give or what others give relative to their income. I do feel good about giving and I’m motivated by the social dynamics and the tax benefits depending on the year (my annual gross income).
End of the day, giving your money is part of your personal finance plan but also clearly part of the personal development plan and being a decent human. Find a tax exempt organization that you believe in, volunteer your time or money, or go start your own!