Leganza, The Effects of Tax Incentives to Donate Wealth to Charity: Evidence from Qualified Charitable Distributions
Can tax incentives encourage people to donate wealth to charity? Using regression discontinuity, I estimate the causal effects of tax rules that incentivize transfers of funds from retirement savings accounts to charities once individuals turn 70.5. These transfers, called qualified charitable distributions (QCDs), are excluded from taxable income and have additional tax benefits. I find that QCD eligibility significantly increased donations after the Tax Cuts and Jobs Act, which reduced incentives to itemize deductions and thus strengthened incentives to use QCDs to facilitate tax-advantaged giving. The increase occurred on the intensive margin and reflects increased likelihoods of donating large sums.
Lloyd Mayer