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Tax Psychology and the Timing of Charitable-Giving Deadlines

This post was originally published here (Center on Nonprofits and Philanthropy)

Incentivizing and rewarding donations to charitable organizations is a commonly pursued policy goal. To this end, charitable donations receive favored treatment in the federal tax code. Tax filers may claim their charitable giving as an itemized deduction, reducing taxable income and thus taxes paid.

Under the current system, charitable-giving tax accounting aligns with the calendar year. A tax filer sitting down in March 2016 to complete a 2015 tax return would need to document charitable giving activities between January 1, 2015 and December 31, 2015. In this brief, we consider the merits of a modification of this deadline permitting tax filers to deduct any charitable donations made prior to the tax filing deadline (typically April 15 of the following year). Under this policy, if a tax filer donated to charity in March 2016, he or she could immediately claim the deduction when filing a 2015 tax return.1 This alternative deadline has been examined in past research and policy writing (Steuerle and Sullivan 1995; Steuerle 2013)2 and was included in the America Gives More Act of 2014, which passed the US House of Representatives in July of 2014.

How might these different deadlines influence people’s motivation for charitable giving? In this brief, we approach this question based on insights from the behavioral public finance literature.

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Author: Alex Rees-Jones, Dmitry Taubinsky

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