The Real Cost of Giving

A Small Price to Pay

While there are great personal rewards for giving back, most members are surprised that they can make a significant difference without sacrificing their lifestyle - especially when the tax advantages of charitable contributions and capital gain avoidance are factored into the equation. These graphs compare the ten-year growth rate of $5 million in net worth to the same net worth after deducting a one percent contribution. Assuming a conservative after-tax earning rate of 7%, the untouched $5 million in net worth nearly doubles in ten years, growing to $9.8 million. The same net worth minus the annual one percent gift reaches the same value of $9.8 million in the very next, eleventh year. It truly is a small price to pay.

The After-Tax Cost of Giving

An individual contributing 1% of a net worth of $5 million would give $50,000. But after a 40% tax savings, their actual cost of giving is only $30,000. And if appreciated assets are given, capitial gains taxes are also avoided, for a 60% tax savings. The actual cost of the $50,000 gift is then reduced to $20,000.

Growth of Net Worth: Giving vs. Not Giving

Over a 10-year period, giving 1% percent annually has very little affect on net worth compared to not giving. When tax deductions are considered, the worth of the giver reaches the same value as the non-giver (9.8 million) in the eleventh year.

Read about the benefits of being a member of the One Percent Club. If you like, sign up now online.