Making charitable gifts towards the end of the year allows you to deduct the contributions on your tax return, but the crunch of the holidays can make it difficult to make thoughtful decisions about the non-profits you’d like to support. Donor-advised funds provide a long-term solution to this problem.
Watch the replay of Kiplinger’s Spotlight On Year-End Tax Planning And Charitable Giving in association with the Jewish Communal Fund.
Contributions to a donor-advised fund are tax deductible when you put the money in the fund as long as you itemize. But once you’ve contributed to the fund, you have an unlimited amount of time to decide which charities to support. You can make grants of nearly any size to eligible 501(c)(3) charities (usually a $50 minimum and no maximum). Plus, you can grant the money to charities whenever you wish— whether you want to help out quickly after a natural disaster, give out some money every year, or keep the funds growing in the fund over time and make a large donation all at once. The money can grow tax-free in the donor-advised fund’s investment pools—you can usually choose among several mutual funds—until you make the grants.
In addition to cash, you can donate appreciated stock and other assets to a donor-advised fund. In that case, you’ll get a double benefit, because you’ll get a deduction for the contribution (assuming you itemize) and you won’t have to pay capital gains taxes on the sale of the assets. Because the donor-advised fund is a charitable account, it won’t pay capital gains on the sale of the assets either, increasing the power and reach of your contribution.
Donor-advised funds have many of the same benefits as a family foundation but without the administrative complexities and high fees. Some families get multiple generations involved and use the funds to help teach their kids and grandkids about philanthropy. You can also name family members as successor advisors, continuing your charitable giving legacy for generations to come.
Explore how a donor-advised fund through the Jewish Communal Fund can help you maximize your charitable impact with flexibility and ease. From tax benefits to building a philanthropic legacy, find out how you can make giving more meaningful for generations to come.
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