Boost the Impact of Your Charitable Giving with a Donor Advised Fund (DAF)

?? You may have heard of the term tax loss harvesting, but what about tax gain harvesting? Learn how you can enjoy tax benefits from your capital gains (yup, you read that right) while maximizing your charitable giving with a Donor Advised Fund!

What we’ll cover:

1. What is a Donor Advised Fund (DAF)?
2. Is a Donor Advised Fund (DAF) right for me?
3. Use Cases
4. Limitations

What is a Donor-Advised Fund (DAF)?

A Donor-Advised Fund (DAF) is a charitable giving account managed by a 501(c)(3) organization. It allows you to contribute assets, such as cash, securities, cryptocurrency, private company stock, real estate, and more, while receiving an immediate tax deduction for the donation.

As the donor, you retain the ability to advise on how your contributions are invested and distributed—determining when, how much, and to which charities the funds are granted.

Is a Donor-Advised Fund (DAF) Right for Me?

A DAF may be a great fit for you if:

• You own appreciated assets like stocks or cryptocurrency.
• You typically donate at least $5,000 annually to charity.
• You’re looking for tax-efficient ways to support causes you care about.

Let’s explore these in more detail:

#1: You Own Appreciated Assets (Stocks, Crypto, etc.)

Contributing long-term appreciated assets to a DAF offers unique tax benefits:

• Tax Deduction at Fair Market Value (FMV): You get a charitable deduction for the asset's full value as if sold, without paying taxes on the capital gains.
• Zero Capital Gains Tax: Since the asset is donated directly, you avoid any taxes on the appreciation.

#2: You Donate at Least $5,000 Annually

While DAFs provide great flexibility, they do come with administrative costs. Be sure to weigh these against the tax benefits to determine if a DAF aligns with your charitable goals.

#3: You Want to Reduce Taxes While Supporting Charities

Keep in mind, once assets are donated to a DAF, your control is limited to making advisory recommendations. Assets in the DAF cannot be withdrawn or redirected for personal use.

Use Cases

1. Stacking Contributions for Maximum Tax Savings:

Example:

• Annual Giving: $10,000/year
• Higher Tax Year: Contribute $50,000 in one year (37% tax bracket). Distribute $10K/year over 5 years. → ~$18,000 tax savings.
• Spread Over 5 Years: Contribute $10,000/year in lower brackets (24%). → ~$13,000 tax savings.
• Stacking Saves: ~$5,000

This strategy can also maximize deductions for those close to the standard deduction threshold.

1. Simplified Record-Keeping:

A DAF consolidates your charitable contributions into one account, reducing the complexity of tracking receipts from multiple organizations.

Limitations

1. Deduction Limits Based on Adjusted Gross Income (AGI):

Cash donations: Deductible up to 60% of AGI.

Appreciated assets: Deductible up to 30% of AGI.

1. Eligible Recipients:

Funds can only be granted to public charities, not private family foundations.

?? Have Questions? Contact your tax team at [email protected] for guidance on Donor-Advised Funds. Not a Gelt customer just yet? reach out https://go.joingelt.com/LIArticleSaC

This content is for educational purposes only and does not constitute financial advice. Always consult a qualified professional before making financial or investment decisions.