Donations in Debt

Even with the burden of debt, most people still find the means to give back.

Consolidated Credit polled over 1,500 indebted borrowers to see if personal financial challenges curtail charitable donations. We found that even as families work to eliminate debt, they find the funds to give to those less fortunate.

Graphic displaying statistics on how people still donate even when they are in debt.

Where does charity fit into a household budget?

When you categorize expenses in your budget, things like charitable donations and tithes at church are a discretionary expense. Discretionary expenses are the nice-to-haves in your budget. When money is tight and your budget is limited, discretionary expenses are the first thing to go.

However, the survey shows that most households will cut personal discretionary funds before they cut out charitable giving. So families may cut back on entertainment or dining out, instead of nixing a donation or weekly tithe at church.

How charitable giving can be financially beneficial

It may seem self-defeating to continue charitable donations when someone is struggling financially themselves. However, there is some logic in cutting other discretionary expenses before cutting donations.

As the experts at Charity Navigator explain, gifts to qualified charitable organization can entitle you to valuable tax deductions. This offsets the cost of giving in a way that you don’t get with other types of discretionary expenses.

“If the gifts are deductible, the actual cost of the donation is reduced by your tax savings. For example, if you are in the 33% tax bracket, the actual cost of a $100 donation is only $67 ($100 less the $33 tax savings)”

They go on to explain that the real cost of donations goes down as you go up in tax brackets. Of course, that also means that households in a lower tax bracket then the real cost of donations is not valuable. In the 15% tax bracket the real cost of that $100 donation would be $85.

In any case, the real cost of a donation is less than the real cost of a $100 night out on the town. If you cut donations in favor of keeping your budget for dining out, then the real cost is equal to whatever you spend. With that in mind, it makes sense from a financial standpoint to cut personal wants before you cut donations. Giving effectively gives back in the form of tax deductions.

Use this infographic

<a href="https://www.consolidatedcredit.org/infographics/donations-in-debt/" target="_blank"><img src="https://www.consolidatedcredit.org/wp-content/uploads/2017/04/donations01.jpg" alt="Graphic displaying statistics on how people still donate even when they are in debt." class="img-responsive" /></a>