Managing Investments and charitable giving can be intimidating, especially when it comes to record-keeping for taxes. Skipping a step or misplacing a document can have serious consequences. There’s also the challenge of timing your investments so that it is financially optimal and affects your taxes the way you intend. With all of these factors in play, you might consider to donate with a donor-assisted fund.
What are Donor-Advised Funds (DAF)?
A donor advised fund is a type of giving program. A donor-advised fund is held in and managed by a public charity. It gives you the opportunity to support the charity of your choice while earning the best tax benefits. Another way to think about it is as a charitable gift savings account.
How does DAF donation work?
First, the investor chooses a charitable organization that sponsors a DAF program. Next, the investor makes a non-revocable donation to that organization, establishing a donor-advised fund and becoming a donor-advisor. The sponsoring organization takes over the paperwork process, while the donor-advisor chooses where the money goes, starting out with investments to build the fund. The donor-advisor then directs disbursements (as allowed by IRS guidelines). The sponsoring organization approves the disbursement, and the grant is made. You can add advisors or successor advisors at any time, passing on the fund to further generations to extend your legacy.
Donor advised funds offer number of tax reductions to the donors:
- Reduction of Income Tax: As a donor-advisor, you will receive an income tax deduction in the same year you make a donation to your Donor advised funds. There are some limitations on the amount of the deduction and carry-forward period.
- Reduction of Capital Gains Tax: You will incur no capital gains tax (a tax imposed on profits from the sale of specific types of assets) on gifts of appreciated assets.
- Reduction of Alternative Minimum Tax (AMT) : If you are subject to the alternative minimum tax (AMT) which is a supplemental income tax, your contribution might reduce your Alternative Minimum Tax impact.
At Distance Teaching and Mobile Learning, our goal is to help all children get an education using technology. We rely on donors like you to help our mission of developing free advanced educational technologies to help every child learn. Thus, we wanted to explain what Donor-Advised Funds were, how they work, and why use them. So, you could take advantage of them to help children around the world through our work. We have all been touched by the power of education. Help others experience that power, and donate today!
Note: The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice.