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Personal Finance

Financial Planning

The right amount to donate to charity

A contact sheet from LIFE photographer Lisa Larsen's pictures from the wedding -- with the famous shot of John and Jackie feasting on pineapple circled in the photo editor's traditional red pencil. , the circle says,

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What's an appropriate amount to give to charity? My wife and I are in our early 30's and make more than $100,000 a year. But we have two kids and financial obligations, so we struggle with whether we're giving enough. If I knew what our peers are doing, I might have a better feel for what's reasonable. -- Jim M., Brookfield, Ill.

If you want to use the giving habits of people with income similar to yours as a guide to your own philanthropy, you can find a cornucopia of comparative stats at the Chronicle of Philanthropy's website.

With just a few clicks in the How America Gives section of the site, you'll quickly see that Americans with adjusted gross income between $100,000 and $200,000 contributed just under $3,400, or 4.2% of their discretionary income, which is the amount they have to spend after paying taxes and various household expenses.

Those who earned $50,000 to $100,000, by contrast, contributed about $2,000, or 6% of discretionary income, while people who earned more than $200,000 gave roughly $14,000, or just over 4%.

But you can also drill down deeper and come up with figures broken down by state, metro area, town and even zip code.

So, for example, if you plug in the zip code for your hometown, you'll find that people who live near you who have an income of $50,000 to $100,000 contributed $1,371 on average, or 4.2% of their average estimated discretionary income of roughly $33,000, while your neighbors with higher incomes in the $100,000 to $200,000 range contributed $2,104, or a bit less than 3% of discretionary income of just over $77,000.

The amounts are based on charitable contribution deductions filed with the Internal Revenue Service by people with adjusted gross incomes of $50,000 and up for the 2008 tax year. (Don't worry; no names were divulged.)

Stats for 2009, as well as for lower-income groups, are available from Commerce Clearing House, although not with anything near the same level of detail.

Figures like these clearly have a peek-behind-the-curtain appeal, especially those that zero in on the giving habits of the wealthy or that purport to rank American cities by their generosity. But while they may be useful for gauging whether the amount you plan to deduct for charitable contributions might raise eyebrows at the IRS, they have some shortcomings as a true measure of our benevolence.

One reason is that they reflect the donations of only a third or so of taxpayers, specifically those who itemize deductions.

These stats also understate Americans' actual altruistic tendencies in that they don't take into account the value of the time and services that volunteers contribute to any number of charitable organizations, as that can't be claimed as a deduction (although certain out-of-pocket expenses can be). Similarly, they exclude more personal expressions of generosity, such as providing direct financial assistance to needy family members or friends.

But even aside from the issue of how accurately such figures reflect our beneficence, there's another reason you have to be careful about using these or any other guide for your own philanthropy: Giving to charity reflects not just magnanimity, but how one must balance the aspiration to give against an array of competing financial responsibilities.

The Chronicle attempts to address this issue by adjusting income for taxes and expenses and then couching giving as a percentage of the resulting discretionary income. But that figure is just an average, too. In the real world families with very similar incomes could have widely disparate discretionary incomes for any number of reasons, including different numbers of children and higher-than-average medical costs.

All of which is to say that I think you're going to have to work out on your own what's reasonable in your situation and how much you can contribute while meeting your financial obligations to your family.

Whatever level of giving you decide is right for you, you'll want as much of your contribution as possible to go to the people or causes you want to help, as opposed to middlemen or, worse yet, scamsters.

You can do that by going to the Charity Navigator site. This site, which made Money's 2010 list of the 20 Best Money Websites, rates 5,000 charities based on several factors, including how much of the revenue they collect goes to programs they support as opposed to administrative and fund-raising expenses.

So however your giving may compare to your peers', you can better focus your efforts on the groups that are likely to have the greatest impact on the causes that matter most to you.