Donor-advised funds offer easy and flexible charitable giving with great tax planning benefits. Here are five ways to benefit from donor-advised funds during tax season.
- Centralize Giving and Records. Stop searching for donation receipts. Donor-advised funds let you focus on one charity for tax purposes. All your donation records come from your fund. You can plan the amount you want to give easier, advise grants to the numerous charities you care most about, and you don’t need to worry about writing and mailing numerous checks (donor-advised fund administrators distribute your donations too).
- Harvest Gains and Rebalance Your Portfolio. Contributing appreciated assets to charity can offer greater tax-savings than donating cash. Donating appreciated securities, at fair market value if held more than a year, to your donor-advised fund can provide a charitable deduction that helps off-set capital gains taxes. You can also strategically rebalance your portfolio. Donating low basis appreciated securities can increase your portfolio’s overall cost basis.
- Budget and Schedule Your Giving. How much do you want to give this year? Next year? Donor-advised funds make it easy to see how much you’re giving and to whom because the information is all in one place. Do you give regularly to one or more charities during the busy holidays – or some other time that isn’t convenient to remember and take the time to do it? Schedule your grant advisements in advance, when it’s convenient for you, for the time(s) you want to gift to charity. Your donor-advised fund will take care of it.
- Separate Donating from Gift Giving. You should donate at the optimal time for you tax-wise and make charitable gifts at the best time for you too. Did you sell a business or receive a bonus that created large tax liabilities? Do you have appreciated securities you would like to sell but are worried about the tax consequences? Do you have an IRA mandatory distribution and the taxes that come with it? Would you like to donate more now, while you’re working and at a higher tax bracket, but continue giving charitable gifts while you’re in retirement? It may be the right time to donate now – even if you want to distribute your giving over more than this tax year. Donor-advised funds let you donate to charity now for a charitable deduction, while making charitable gifts now and in the future.
- Leave a Charitable Legacy to Heirs Tax Free. Naming your heirs as successors to your donor-advised fund with charitable grant advisement rights is a great way to leave a charitable legacy without paying inheritance tax. Other options include creating a donor-advised fund for heirs with the purpose of funding it from your estate – from retirement assets, insurance policies or charitable trusts – a strategy that can also offer tax advantages. Tax and financial advisors can assist you in picking out the best approach for your circumstances.
Donor-advised funds can make charitable giving a less taxing experience. You can save more, give easier and give better. Donor-advised funds are the “smart charity” fund you can use during tax season – and for charitable giving throughout the year.
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Andrew Hibel serves as President and is the Founder of The Advise Us Fund. He is also Chief Operating Officer and Co-Founder of HigherEdJobs. Andrew holds a B.A. in Economics and a M.Ed. from the University of Illinois and a J.D. from Indiana University, Indianapolis. He has been a planned giving officer for Penn State University and Advocate Charitable Foundation and served as Director of Gift Planning and Estate Administration for the Jewish Federation of Metropolitan Chicago.
The information in this blog post is general and educational. It is not intended nor should it be construed as legal, tax, investing or financial advice. Individuals should consult with their own advisor about charitable giving arrangements The Advise Us Fund® may describe.
