The Pentera Blog
Study Shows Affluent Households Remain a Key Source of Nonprofit Revenue Despite Recent Drop in Giving Levels
Affluent American households continue to be a much more promising source for charitable giving than average U.S. households, according to the 2023 Bank of America Study of Philanthropy: Charitable Giving by Affluent Households.
Written and researched by the Indiana University Lilly Family School of Philanthropy and the ninth in a series of similar biennial reports, the study found affluent households are much more likely to give to charity—and in greater amounts—than the general population.
While the report showed affluent households remain a key source of donations for U.S. nonprofits, it also revealed that a steady decline in the overall percentage of affluent households donating to charity is continuing. The study found 85.1% of affluent households reported giving to charity in 2022—down from nearly 98% in 2005. The report does not speculate about a reason for the decline but notes that it mirrors a parallel decline in charitable giving by the overall U.S. population over the same period. In 2000 about two-thirds of U.S. households contributed annually to charity. By 2018, the most recent year for which data is available, that had fallen to 49.6%.
The study also revealed a decline in the average dollar amount given by affluent households annually compared with a pandemic-era peak in 2020. It found affluent donors gave an average of $34,917 to charity in 2022, down from $43,195 two years before. Correcting for inflation, the 2022 average giving level is approximately the same as the level recorded in 2017.
Potential reasons for less charitable giving among the affluent are numerous and probably vary in relevance and impact from year to year. However, a few possible contributors stand out. For example, fewer wealthy Americans are itemizing when filing their taxes each year now compared with before the passage of the Tax Cuts and Jobs Act (TCJA), which nearly doubled the standard deduction beginning in 2018. In 2017 72% of high-net-worth households planned to itemize. That dropped to 59% in 2018 and was just 35.8% in 2022. The pre-TCJA, lower, standard deduction may have created a greater incentive for people to make deductible charitable donations. The higher standard deduction, conversely, may have had the opposite effect by removing a tax incentive for at least some charitable donations.
Another reason for the decline may be that more affluent households simply feel they don’t have the resources to give as they once did. In 2016 less than 15% of wealthy households said they do not give to charity because they didn’t have the resources to do so. By 2023 that percentage had risen to 25.5%.
On the plus side, volunteering among high-income households rebounded in 2022. The study found that 36% of affluent individuals volunteered at nonprofits. That’s a healthy increase compared to the pandemic-era low of 30.4% but still far below the pre-pandemic figure of 47.9%.
The study also found the use of donor-advised funds (DAFs) has continued to rise among affluent households. More than 10% of charitable dollars donated in 2022 came from DAFs compared with 8.5% in 2020. About two-thirds of affluent individuals who used a DAF said they did so for tax reasons.
In conducting their study, researchers surveyed 1,624 affluent households in early 2023 about their giving in 2022. Of the households surveyed, the average annual income was $523,472 and the average net worth was $31 million. Data for giving by the general population is based on the Lilly Family School of Philanthropy 2019 Philanthropy Panel Study on giving in 2018.
You can see the full study here.
