Lately, I’ve spent time lately reviewing my 2010 giving plan and setting plans and budgets for 2011. I generally start prep work for my tax return in January — preparing my list of charitable donations and organizing the related receipts takes longer than the whole rest of my return! Many years ago, my husband and I made the decision to give 10 percent of our income to charities and put 10 percent into retirement savings every year. At first it felt like a stretch, but we have generally been able to exceed those goals.
So, I wasn’t too surprised when I received a letter from the IRS asking for a modified audit of my 2008 tax return. We are outliers in our income bracket for the amount we give to charity and the number of charities we support. The IRS did not want to audit our complete return; they just wanted documentation of the 40 charitable gifts we reported that totaled over 10 percent of our income.
Benchmarking is another aspect of my annual January tasks. What can I learn about what other households in my income bracket give? The best source for this information is research commissioned by Bank of America Merrill Lynch and conducted by the Center on Philanthropy at Indiana University (COP). This past November, COP released the “2010 Study of High Net Worth Philanthropy.” If you are involved in major gifts in any way, as a donor, nonprofit leader, or a fundraising professional, and have not yet read the 75-page report, please make it a priority.
Half of all giving in America and 65-70 percent of all individual giving is made by high net worth households (HNWH). So, you may wonder, what is the criteria to be one? In the COP research, a HNWH is a household with income of at least $200,000 annually and net worth of at least $1 million excluding the primary residence. Nearly all HNWHs give, and the amount increases as the level of income and wealth increases. Most high net worth individuals are volunteers as well as donors, and their giving to specific organizations typically follows their volunteerism.
Giving by the wealthiest dropped in 2009 compared to 2007, as did the stock market and confidence in financial security. However, giving as a percent of income did not change significantly except for the wealthiest ($20 million and more in assets) households.
What did I learn about my giving compared to the median giving for other high net worth households in my level? Median giving by all HNWH is only $12,000, but the totals for the wealthiest households are much higher. (Please refer to the full report for more info). Now I understand why we received the letter from the IRS. Our giving is much higher than peers in our income range! For my husband and I personally, it’s not about our net worth, but rather our values. High net worth or not, I encourage you all to give to the best of your ability.
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About the Author
Aggie Sweeney CFRE
Aggie is a sought-after consultant and speaker. Nonprofit leaders trust that she can tackle complex campaign issues and give them solid advice.