Donor-advised funds (DAFs) provide a simple and flexible way to give to your favorite charities. When you give to a donor-advised fund, you generally receive an immediate tax deduction while maintaining the power to recommend distributions or grants from the fund to nonprofits over time.
You can usually donate a variety of assets to a donor advised fund, which is like a charitable investment account maintained by a third-party charitable organization. A contribution to a donor-advised fund is treated as a gift to a public charity; therefore, you receive a tax deduction in the year of any donations to the fund. Because of the generous deductibility limits for gifts to donor-advised funds, all contributions to the DAF are irrevocable and must be considered complete gifts meaning no material restrictions may be placed on distributions from the fund.
Gifts of cash are usually deducted at 60% of the donor’s adjusted gross income (AGI) compared to 30% of the donor’s AGI for gifts to private foundations. Gifts of long-term appreciated property are usually deducted at 30% of the donor’s AGI compared to 20% of the donor’s AGI for gifts to private foundations.
Most donor-advised funds are invested for growth, so donations to your DAF can potentially grow tax-free based on your investment preferences offering even more money for distribution to your favorite charities.Support Charities Important To YouYou may remain actively involved in your charitable giving through your DAF by recommending distributions from your DAF to IRS-qualified public charities now or over time – a simple way to complete your annual giving. And, you can usually involve family members or heirs who can continue to advise your fund when you are no longer able to ensure your legacy giving continues.
You may remain actively involved in your charitable giving through your DAF by recommending distributions from your DAF to IRS-qualified public charities now or over time – a simple way to complete your annual giving. And, you can usually involve family members or heirs who can continue to advise your fund when you are no longer able to ensure your legacy giving continues.
Donor-advised funds and gift funds offer many benefits to the donor, including:
Sally Smith is 55 years old, enjoys supporting multiple non-profit organizations in her community and desires a taxable deduction but wants to control the amount and timing of when her donations will go to the various non-profits she supports. By making a contribution to a Donor Advised Fund, Sally can make a contribution in whatever amount she wants to give for the tax year and request distributions to these charities at her desired date in the future. This strategy allows Sally to take the time she needs to determine which charities she wants to give to without missing the tax deadlines for making a charitable contribution. While these assets are held in the Donor Advised Fund, they can be invested and perhaps have a much larger financial impacts for the organizations she plans to distribute these funds to months or years later.
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