Mentioning Tax Deduction Up Front Increases Charitable Interest

When marketing to donors, how much should you focus on the tax benefits of a charitable gift? Some research has indicated that tax benefits are a small part of the charitable gift decision, and some in planned giving have suggested downplaying tax benefits in marketing. But here's the rub: Researchers also know that the answers to their survey questions are often affected by "social desirability bias": Who wants to admit that one of their main reasons for making a gift to charity might be the tax benefits?

Now there is research showing that mentioning the tax deduction at the beginning of a sentence about a planned gift significantly increases interest in making the gift. The research by Russell James, J.D., Ph.D., CFP®, director of graduate studies in charitable planning at Texas Tech University, was presented last year at a panel on new philanthropy research moderated by Pentera President & CEO Claudine A. Donikian.

In a survey of more than 1,700 people, James tested three versions of a sentence about a planned gift:

• Some participants read a sentence that didn't mention a tax deduction at all.
• Other participants saw a version that mentioned the deduction at the end of the sentence.
• Still other participants saw a version that mentioned tax benefits at the beginning of the sentence.

Participants were then asked if they were "interested now" in making a charitable gift or if they "will never be interested." The study used the three different sentences with three different types of planned gifts: life-income gifts, gifts of property, and a description of charitable remainder trusts. Here are the results for life-income gifts:

Life-Income Gifts
Wording		Interested Now	Will Never Be Interested
Receive a tax deduction and make a gift that pays you income for life.		50%	8%
Make a gift that pays you income for life and receive a tax deduction.		33%	14%
Make a gift that pays you income for life.		31%	20%

The increase in those who said they were "interested now" when the tax deduction came first was the most for the life-income gifts, going up 19% (from 31% to 50%, see chart). For the other types of gifts, when the tax deduction was mentioned first:

• Interest in a gift of property went up 15% (from 11% to 26% "interested now").
• Interest in charitable remainder trusts went up 7% (from 21% to 28% "interested now").

James said that his research strategy was specifically designed to get around the social desirability bias. People tend to attribute "positive reasons" for their actions, and that doesn't include seeking tax benefits, he said. But this research affirms the importance of prominently including tax benefits in your marketing.