• AllisonDunlap

Tax-Smart Investing for Charity

If you have charitable inclinations and large capital gains in your investment portfolio, you might want to consider a Donor Advised Fund. A Donor Advised Fund (“DAF”) is essentially a charitable investment account enabling simplified, flexible and tax efficient charitable giving. Among other advantages, a DAF allows you to gift appreciated stock. Contributing such assets may enable the donor to eliminate capital gains taxes that would otherwise be incurred upon sale of the asset, as well as to become eligible for a tax deduction in the current year.

With a DAF, philanthropically-minded individuals, families and businesses can make an irrevocable gift to a public charity that sponsors a donor-advised fund program. The donor can then generally choose investments for that account and recommend grant recipients to the DAF sponsor. There are a number of benefits to this charitable giving tool, including:

* Tax benefits – by donating long-term (held for more than one year) appreciated assets to a DAF, you generally won't have to pay capital gains, and you can take an income tax deduction in the amount of the full fair-market value of the assets (up to 30% of your adjusted gross income)

* Ability to donate a wide range of appreciated assets, such as stock, mutual fund shares, real estate and Bitcoin – not all charities accept these non-cash donations

* Simplified record-keeping – if you typically donate to more than one charity, a DAF allows you to consolidate and keep track of your giving with just one tax receipt

* Donations can grow tax-free – this potentially increases the amount you can give to your charity/charities over time

* Integration of philanthropy with estate planning – many sponsors permit accounts to be passed down to heirs, facilitating inter-generational charitable planning

Anyone interested in giving to a donor-advised fund should do the proper research to ensure that their fund meets their particular preferences. With many funds available, potential donors should consider account minimums, related fees, investment options, types of permissible contributions and distribution of proceeds.

If you’d like to learn more, feel free to email me at or contact your tax advisor.

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