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Charity Guide

What is philanthropy?

Philanthropy involves large-scale charitable giving to worthy causes, but it is more than just charitable giving. Philanthropy is an effort by individuals or organizations based on an altruistic desire to improve human welfare, and the wealthy sometimes establish private foundations to promote their philanthropy.

Nonprofits are organizations established to support various social causes, such as education, health, science, public safety, and human rights. In the United States, organizations that qualify as nonprofits are exempt from federal tax liability under Internal Revenue Code (IRC) 501(c).

key takeaways

  • Charity refers to acts of charity or other good deeds that help others or society as a whole.
  • Philanthropy can include donating money to a worthy cause or volunteering time, energy, or other forms of altruism.
  • Transparency is serious business for many nonprofits, and how funds are obtained and spent should be carefully documented. Technology, including social media, also affects how much individuals donate to others.
  • Andrew Carnegie is one of America’s most prominent philanthropists, known for his large-scale charitable giving, including the establishment of more than 2,500 libraries around the world.
  • In modern times, in addition to feeling good and helping others, philanthropy is often done by people seeking tax deductions.

Learn about philanthropy

Charity refers to acts of charity or other good deeds, such as volunteering time or effort to help others or contribute to the well-being of society as a whole. For some, philanthropy means donations, usually large sums of money, to support or build university buildings, research centers or fund four-year college scholarships. For others, philanthropy means annual donations to the local theater, food pantry or public school.

From local to global, charitable giving comes in many ways, from corporate philanthropy to individual philanthropists. Philanthropy may be for tax relief or altruism, or both. Anyone can become a philanthropist by giving their talents, time, money or skills.

History of Philanthropy

Philanthropy can be traced back to Greek society. For example, the famous philosopher Plato in 347 BC instructed his nephew in his will to use the proceeds of the family farm to finance Plato’s institute. The money helps students and staff keep the college afloat.

Some 150 years later, Pliny the Younger contributed a third of the funds to a Roman school for boys. He instructed the student’s father to figure out the rest. The aim was to educate young Romans in the city rather than abroad.

In 1630, John Winthrop of the Massachusetts Bay Colony preached to Puritan settlers that the rich should care for the poor who couldn’t help themselves. In 1638, John Harvard laid the foundations for Harvard after he bequeathed half of his estate to found the school.

Across the ages, notable philanthropists include Mother Teresa and Norman D. Rockefeller. In the 21st century, individuals and corporations continue to engage in philanthropy in many forms, such as Warren Buffett, Melinda Gates, and Dolly Parton.

Technology, including social media, also affects how much individuals donate to others.

example of philanthropy

In America, many people donate their money to causes they believe in. Perhaps the most famous example of philanthropy comes from Andrew Carnegie, simply because of the size of his giving. Carnegie’s fortune helped build more than 2,500 libraries around the world. He also endowed several universities and a charitable trust that survived 100 years after Carnegie’s death in 1919. His total charitable giving is estimated at more than $350 million. Carnegie kept his creed that the rich die in shame, and the rest of society learned to follow his example.

Another example is the Ford Foundation, founded by Edsel Ford, son of Ford Motor Company founder Henry Ford. The foundation focuses on strengthening democracy, improving economic opportunity and advancing education.

Likewise, billionaire and Microsoft tycoon Bill Gates and his ex-wife Melinda established the Bill & Melinda Gates Foundation to support global development and global health initiatives.

Today, the charitable donation deduction allows US taxpayers who make large charitable donations a generous tax deduction in the year of their donation. Instructions for this tax deduction can be found on Schedule A on the IRS website.

Charity benefits

There are many benefits to being a philanthropist. Experts have found that charitable giving can improve a person’s emotional and even physical health, and philanthropists are satisfied knowing they are contributing to the greater good.

Some studies have shown that philanthropists have lower levels of depression, higher self-esteem, lower blood pressure, and may even live longer than those who don’t donate.

The benefits of philanthropy are not limited to individuals. Companies that support charitable giving can reap substantial benefits by building a better public image, creating more significant brand awareness, and attracting new partners and talent that might be attracted to a company that contributes to charitable causes.

Additionally, employees who work for companies that give back are happier and contribute more at work. And, since companies are created to make money, strong philanthropy tends to boost sales and new customers.

Philanthropy and Taxes

While it is true that individuals benefit from charitable giving when tax time comes, some benefit more than others. The IRS allows most people to deduct about 60% of their adjusted gross income (AGI).

However, some very wealthy people use charitable giving to protect themselves from huge taxes. But some say billionaires evade paying their due taxes under the guise of charitable giving.

Donation Statistics

Americans and U.S. organizations donated $449.64 billion to charities in 2019, one of the highest charitable giving years on record. The amount increased by 4.2% over the previous year. Individual giving was estimated at $309.66 billion in 2019, up 4.7% from 2018. Foundation giving was estimated at $75.69 billion, up 2.5 percent, while bequest giving was $43.21 billion, up 0.2 percent. Corporate donations were US$21.09 billion, an increase of 13.4%.

As much as 28.5% of charitable donations went to religious organizations. The majority of donations to religious groups went to local places of worship, and about 14 percent went to educational groups. Human services groups reportedly came in third, with 12.5 percent of the windfall that year, while grant foundations received 12 percent and 9 percent of the amount donated to health organizations.

What is the difference between philanthropy and philanthropy?

While some people use the terms charitable and charitable interchangeably, philanthropy tends to cast a wider net of giving. Its role is to help groups within a society or community to prosper in the long term. Philanthropy is often based on short-term donations and help from individuals, such as donating coats to the homeless during the winter, helping or donating items to the local food pantry, or donating to a scholarship fund. These are acts of charity, but may not be considered charitable causes, such as building a school or library or donating millions of dollars to a scholarship fund.

Which philanthropist donated the most?

Warren Buffet has donated the most money over his 91 years through 2020, at $48.2 billion, according to Forbes magazine’s annual report.

How can I become a philanthropist?

Anyone can be a philanthropist, even if they are rich now. You can donate your time, effort and cash to specific causes, and over time you may be known as a philanthropist.

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