VIDEO: Boost Your Tax Savings with Donor-Advised Funds
By Joe Dowdall, CFP®, RICP®, CRPC®, CCFC
Do you want to decrease your tax bill and increase your charity contributions at the same time? In this video, I go over the advantages of donor-advised funds (DAFs) and how they can reduce your tax liability.
With DAFs, you can receive immediate tax benefits while giving back to causes you care about in a flexible and effective way. Join me as I explain how DAFs work and why they can be a useful tool for your financial-planning arsenal.
Transcript
Understanding Donor-Advised Funds for Tax Savings
Hi, my name is Joe Dowdall, and I’m a financial advisor at Worth Asset Management. Today, I want to discuss a powerful tool for lowering your taxable income: donor-advised funds. It’s a great way to save on taxes while also supporting the causes that matter most to you. After all, who doesn’t want to reduce their tax burden?
What Is a Donor-Advised Fund?
A donor-advised fund (DAF) is essentially a charitable giving vehicle. It’s administered by a public charity and is designed to help manage charitable donations on behalf of individuals, families, or organizations. Think of it as a tax-incentivized savings account for philanthropy. You contribute money to the fund with the intent of donating it to charity at a later time.
Once you contribute, the money is tax-deductible, even if you haven’t yet decided which charity to send it to. The key thing to note is that once you deposit funds into the donor-advised account, they cannot be withdrawn. However, this is a benefit because your contributions are immediately tax-deductible.
Flexibility with Donor-Advised Funds
While the money technically belongs to the charity once deposited, you still have control over the account. You can name advisors, successors, and beneficiaries to manage or inherit the account, giving you continued flexibility in how you structure the charitable donations.
Choosing the Right Assets for a Donor-Advised Fund
The type of asset you contribute to the donor-advised fund impacts the tax benefits you receive. A popular option is publicly traded securities. By contributing these securities, you can avoid paying long-term capital gains tax on the appreciation. In addition, you can deduct the fair market value of the securities at the time of the donation.
For example, if you purchase a security for $100 and later donate it to the DAF when it’s worth $200, you can deduct the full $200, even though the gain of $100 would otherwise be subject to taxes.
Using Appreciated Assets for Maximum Tax Benefits
Another option is contributing long-term capital gain property, such as appreciated securities. This can allow you to deduct up to 30% of your adjusted gross income. The best part? Once the assets are in the donor-advised fund, they grow tax-free because they are now owned by the charity.
Tax Benefits and Charitable Giving
Donor-advised funds offer a smart way to lower your tax bill while supporting the causes you care about. Although the rules surrounding DAFs can be complex, they offer a significant opportunity to manage both taxes and charitable giving in a more efficient way.
Get Personalized Advice on Donor-Advised Funds
If you’re interested in learning more about donor-advised funds and how they might fit into your financial strategy, I’m happy to discuss your specific situation. You can reach out to me directly, and we can schedule a free 15-minute consultation to explore whether a donor-advised fund is a good fit for your charitable goals and tax planning.
Feel free to contact me at 469-423-1989, email me at joe@worthassetmgmt.com, or scan the QR code on your screen to schedule a conversation. I look forward to helping you with your charitable giving and tax planning.
The information provided is for general guidance and informational purposes only. Please consult with a qualified tax professional for advice tailored to your specific financial situation.