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It may seem counterintuitive, but sacrificial giving can actually result in greater savings long-term. There are several tax benefits that donors can reap, thanks to utilizing a donor advised fund (DAF):
- DAFs are not subject to estate taxes.
- Donations to public charities through a DAF incur immediate tax deductions.
(The IRS does regulate these gifts to public charities, by limiting deductions for non-cash assets held for over a year to 30% of adjusted gross income (AGI) or 60% of AGI for contributions of cash.)
- DAF investments can appreciate without taxes.
- DAF contributions decrease alternative minimum tax (AMT) amounts, if applicable.
- Donors do not incur capital gains taxes on contributions of appreciated assets.
Thanks to these tax benefits, donors can save money in the long run, allowing them to maximize their savings – and ultimately their giving – all while minimizing taxes.
Charitable giving in any form is laudable, but ensuring that you are donating in a tax-savvy way can increase your impact.
