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Charitable giving | Financial goals | Financial Literacy | Khan Academy


2m read
·Nov 10, 2024

So let's talk a little bit about charitable giving, and this one is close to my heart because I run a non-profit.

Why do folks donate to charity? Well, you might have your own motivations. For most folks, I think it just feels good. They might feel that they have certain privileges in life that other folks don't have, or they might want to see a disease cured, help educate folks, help the world in some way.

And if you haven't tried it, I encourage you to. When you donate money, or you donate some of your time, services, or you donate goods to a charity and you feel like, "Hey, I'm making the world a little bit better," it feels really good.

Now, some people might be a little cynical and say, "Oh well, they get a tax write-off whenever they donate money," etc. But I want to be very clear because I've heard that a lot whenever someone has seen someone else donate. "Oh well, they're just getting a tax write-off."

In the vast majority of cases, you do not get more money back than you donate. In most cases, if you say donate a hundred dollars, that's just going to reduce your income by a hundred dollars. Let's say your marginal tax rate is 30% to make the math easy; that means it'll reduce your taxes by 30 percent of that hundred dollars.

So if you donate a hundred dollars to a not-for-profit, to a charity, you will get thirty dollars back in that situation on your taxes. But you still donated a net seventy dollars.

So when folks are donating, don't be cynical about it. They're definitely giving more than they're receiving. There are some special cases; maybe you have a car that you couldn't sell for more than a few hundred dollars, and if you donate to a charity, you might be able to have a slightly larger write-off than that.

But in the great majority of cases, folks are giving more than they're receiving, and what they're really receiving is that feeling that they're doing good for the world.

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