TAX-DEDUCTIBLE ISN’T WHAT IT USED TO BE
You’ve heard the mantra a thousand times: “It’s tax-deductible” (calling the donation “eligible for a tax deduction” would be a more accurate way to put it). You’re being asked to give away dollars you might spend on yourself, your friends, your family. To lessen your cost encourage your generosity, there’s the promise of a sweetener - you’ll get a bit of your donation back via a reduction in taxes.
But for most people, the honest comeback to “It’s tax deductible” is “No, it’s not.”
For starters, only a bit more than half of people pay any federal income tax, regardless of deductions and credits. If you don’t pay, deduction is a moot concept. That donation would be 100% out of your pocket, without offset.
How about the rest of the populace – the 50+% who pay income tax? The majority of taxpayers do not itemize on their federal tax return. Even discounting those who just don’t want to spend the time to deal with the tracking and substantiation, the deductible spending of most folks won’t meet, let alone exceed, the standard deduction.
Why not? Several factors in recent years:
• rock-bottom home mortgage loan rates mean a much lower interest deduction
• the standard deduction is regularly adjusted upward
• medical expenses aren’t deductible until you hit an ever-increasing threshold
• added credits and deductions that are available without itemizing on Schedule A
• the deduction for vehicle use for charity hasn’t gone up since 1998
• a growing number of people rent housing - property taxes buried in rent are not deductible
So what’s a fundraiser to do? If the crutch of a somewhat juicy tax deduction is a non-starter, there are other tactics being used during the ask.
• emphasize the good that will be accomplished - help the donor visualize how they and those they love could be better off in a world with a little less adversity
• spend your limited fundraising time talking to those who do itemize instead of those who don’t
• remind potential donors of times when they were helped by others, everyone takes a turn
• suggest that “paying it forward” can be a powerful, beneficial, and contagious good deed
• appeal to the innate sense of sympathy present in the hearts of most
For those you have more time to interact with, suggest the concept of bunching deductions. Combine 13 mortgage payments, three dentist visits and two donation checks (Jan 1 and Dec 31) into every other year. Adding other strategically-timed medical costs, non-monetary donations, and property tax payments might just be enough to make itemizing a winning approach once out of every two years. The charity receives a gift each 364-366 days, i.e. essentially annually. The donor maximizes deductions by taking the larger of itemized vs standard each tax year.
Success in fundraising is rarely easy. “It’s tax-deductible” is not as strong a selling point as it once was. Place that further down the list of “benefits” touted to most potential donors. Emphasize the worth of the cause as the primary reason to be generous.
g us all that we can automatically donate to the Scholarship Cup through our dues (See Dorinna) & the finalist Literacy Program Selection for the Car Show will be at the 1/6/16 meeting.
