Charitable deductions – Are these meant for donations inside our country or outside of our country?

I happened to be watching 60 minutes the other evening with another interview with President Obama.   After the interview, they did a short piece on Howard Buffett who is slated to take over as Chairman of the Board for Berkshire Hathaway in the near future.     Mostly, the story was about Howard being a farmer and the great charitable work he is doing around the world.    They discussed that Warren Buffett gave over 31 billion dollars to the Bill Gates foundation which is also spending a great deal of money helping those that are underprivileged around the world.

While I was watching the program, several things occurred to me that I thought might of interest for the smart money moves readers.  First and foremost, it seems to me that we are very concerned with how to raise more revenue in this country to balance out our budget.   Part of the proposed solution is to potentially increase the estate or death tax to capture more assets from the very wealthy when money moves from generation to generation.    One strategy used by the very wealthy today is to set up an assortment of charitable trusts that can potentially lower current income taxes today and estate taxes down the road.   However, nobody questions what is happening with this charitable money.   How much charitable money today that is being deducted is helping causes inside the country versus causes outside of the country?

I’m not sure if anyone knows that answer, but I do know this.  With many families living below the poverty line, unemployment still remains at high levels and homes foreclosing every day, that charitable money could do a heck of a lot of good if it remained within the United States.   Perhaps we need to revisit what really qualifies for a charitable deduction to see if the cause benefits something inside of our country or outside of our country?

This is something we need to consider as money leaves our country every day. Some of it because people take the cash back to their own country and don’t pay taxes and others who get a deduction for helping out those less needy who don’t live in the United States.  For those that do live here, they sure could use a little of that Warren Buffett magic.

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Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder of oXYGen Financial, Inc

Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves


My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

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  • Avatar
    January 10, 2012

    Hi Ted, I understand that viewpoint but the thing is that even the poor in this country are quite rich relative to the vast majority of the world. More than one-half of the world’s people live below the internationally defined poverty line of less than U.S. $2 a day—including 97 percent in Uganda, 80 percent in Nicaragua, 66 percent in Pakistan, and 47 percent in China, according to data from the World Bank.

    As an American, I have previously lived in poverty for years myself (as defined by the federal poverty levels) and in this blessed country, even the poor have access to food stamps and emergency medical care. It would not have been possible for me to die of hunger. In short, even though I had no home, no assets, no anything… I still was rich when compared to a good chunk of the world’s population.

    For this reason, I find it hard to donate to basic need charities here in the U.S. since there are others elsewhere who have it so much worse. And I’m in defensible position where I can fairly and accurately have that bias, since I have been a poor American myself for multiple years. These days I give at least 10% of my pre-tax annual income to internationally focused non-profits for this reason.

    In short, unemployment and poverty in America is not fun (I know!). However, it’s still living in the lap of luxury, on a relative basis. Furthermore, the difference you can make – dollar by dollar – with an efficient int’l focused charity is much more, compared to if it was spent within this borders. $5 here can buy 1 meal for some, $5 in Ethiopia can feed a person for 21 meals or 7 full days. That being said, my primary passion is addressing the root of the problem (i.e. creating clean water supplies, etc) so those in poverty in these countries can eventually become self sufficient.

  • Avatar
    January 30, 2012

    My reason for donating here in this country rather than overseas is that I know what it’s like to be poor, and know that there are many people in this country who are homeless, jobless, and hungry, and for whom there is no safety net. They don’t have enough food or heat or adequate clothing and can’t afford to go to the dentist or get medical care or medications they need. I believe we should help these people first. We spend billions in foreign aid while going into massive debt here at home and neglecting our own because we supposedly can’t afford it. We should take care of our people here first.

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