On NPR this morning, I heard that Chris Long, a defensive end for the Philadelphia Eagles, is donating his entire year’s salary to various charitable organizations that provide scholarships and support to underserved youth. (He already donated his salary from the first six games of the season to fund two seven-year scholarships at his alma mater in Charlottesville.)
That is unequivocally a good thing, and a generous thing. But it’s not without tax consequences.
When I think about charitable gifts, the first thing that comes to mind is their deductibility. But it turns out that the deduction for charitable contributions comes with a couple limitations. First, of course, is that only taxpayers who itemize get to deduct charitable contributions. Of course, given that this is a $1 million plus (more on that in a minute) donation, Long will definitely itemize.
But there’s also a ceiling on the deductibility of charitable donations. An individual cannot deduct more than 50% of her “contribution base” (which in most cases will be the same as her adjusted gross income) in any given year.[fn1]
What does that mean for Long? I don’t actually know. It depends a lot on what he means when he says “salary.” See, he has a 2017 base salary of $1 million, but, with various bonuses, earns cash of $2.25 million. In addition to that, he may earn endorsement income and/or speaking fees and/or investment returns and/or other types of income.
So if he’s donating his base salary, he’ll probably be able to deduct his full donation (which means that he’ll technically only bear $604,000 of the donation). But if he’s donating the full amount of cash he receives from the Eagles, he may only be able to deduct a portion of the amount that he donates.
The tax angle may be the least important part of the story, but it’s a nice hook to talk about a tremendously generous gesture.
[fn1] In some cases, the limit will actually be 30%.