Financial Planning Focus – Gifting to a Donor-Advised Fund

November 29, 2016
By Glen J. Buco CFP®

As noted above, current U.S. tax law allows the charitable donor of appreciated securities to get a tax deduction for the market value of the donation and avoid capital gains taxes. By donating appreciated assets to a donor-advised fund, you receive the full deduction at the time of the contribution. You then advise the fund online to make donations to the charities of your choice, in amounts you choose, and when you choose. Donor-advised funds have grown in popularity due to their convenience and the ability to take full advantage of tax deductibility at the time of donation.

Using the example in Brian’s article above, assuming a 35% income tax rate and 15% long term capital gains tax rate, you will make a donation of $17,000, receive an immediate deduction of $17,000, and save income taxes of approximately $5,950, compared to selling the stock and writing a check.

If you do not elect to distribute all of the funds at the time of donation, the account is invested and any gains will grow your pool of donated funds – though it will not increase your deduction. To avoid losses, which also does not impact your initial deduction, we recommend considering your long-term charitable goals and overall asset allocation when you invest.