I wrote a post in which I referenced the “50% of AGI Barrier.” I realized maybe some of my readers would be unaware of what I was talking about.

First of all, a definition.

AGI is Adjusted Gross Income–the basic number on which the IRS calculates your income tax.

The “50% Barrier” refers to the fact that the US tax code permits you to give up to 50% of your AGI to approved charities and claim a deduction. Gifts beyond 50% of AGI can be carried forward for deduction in the future–up to five years.

A great benefit, indeed. However . . .

For people who regularly contribute 50% or more of their income to charity, however, their contributions beyond 50% will never become deductible, since they will never be able to apply the deduction to a year in which their contributions, otherwise, would have fallen below the 50% deductible limit.

Among those who are charitably minded, this 50% limit on deductible donations forms a mental barrier. As one of my friends has written:

Affluent Christian families have become so conditioned by the appeal of the IRS’ “matching gift program” that many have unconsciously allowed the IRS to set the ceiling on their charitable giving – namely 50% of their AGI.

Let me confess that I’ve been tempted by this one myself. It hurts to “have to” give out of funds for which the government is taxing you.

But I buy food and clothing and just about everything else I need out of post-tax dollars. So why should I stop giving to worthy charitable causes just because the government is taxing me? Why shouldn’t I view the tax deduction as what it is: a government-funded matching grant (to me) for all the gifts I give (up to 50% of AGI). It’s nice to receive that government subsidy, but if God is leading me to give more than the government is willing to subsidize, I should give . . . shouldn’t I? –Whether my gift entitles me to the government subsidy or not.

To quote my friend again,

What if God wanted you to give 60% of your AGI away this year? Is there any biblical or spiritual basis upon which we should allow the taxing agency of our country to regulate how much we give away? What if the IRS’ “matching gift program” was reduced to 25% of your AGI next year, would you consequently reduce your maximum giving to only 25%? What if it went away altogether?

I think the question deserves thoughtful and prayerful consideration by many of us.

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This entry was posted on Thursday, April 24th, 2008 at 11:39 am and is filed under charity, giving. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.