News and analysis
April 18, 2016

Top Earners Gave an Average of $33 Million Each to Charity, IRS Says

The 400 taxpayers with the highest incomes in 2013 reported giving an average of $32.8 million to charity. That’s the second highest average in two decades of data provided by the IRS, behind only 2012.

Together, that group of taxpayers donated more than $12 billion to charity, or about 6 percent of the charitable-contribution deductions claimed by all taxpayers who filed itemized returns that year. Twenty years ago, the top 400 were only responsible for a little more than 1 percent of all charitable deductions.

The IRS provides data on the top taxpayers as measured by adjusted gross income. With more than 147 million filers in the United States, the top 400 account for just 0.0003 percent of filers.

The only other years when the total has reached more than $10 billion were 2012 and 2007 — before the recession.

Una Osili, director of research at the Lilly Family School of Philanthropy at Indiana University, believes that the jump in charitable contributions from some of the nation’s wealthiest people can be attributed in part to the increasing concentration of income and wealth in the years following the recession. Additionally, the technology industry has altered the life cycle of this wealth, with more money finding its way into the hands of younger individuals.

This younger, wealthier generation seems to be more in tune with the urgency of social problems and how to make investments, Ms. Osili said.

"How they’ve made their fortunes was by thinking of new ways of doing things. So they are applying that same lens to the philanthropic sector," said Ms. Osili.

Donor-Advised Funds

Ray Madoff, a professor at Boston College Law School specializing in philanthropy policy and taxes, offered a different explanation. The growth in the share of charitable deductions among high-income taxpayers may be due to the increased role donor-advised funds play in charitable giving among wealthy people with a complex mix of assets, she said. Through donor-advised funds, wealthy people can deduct the appraised amount of assets like commercial real estate rather than the amount they paid.

Donor-advised funds facilitate the donation of assets without readily available confirmed market values, said Ms. Madoff, who often criticizes the expanding use of donor-advised funds in philanthropy.

Over all, the total value of charitable deductions across all returns among taxpayers who itemize has risen from $110 billion (in 2013 dollars) 20 years ago to $194 billion in 2013, according to the IRS data.

Send an email to Ariana Giorgi.