• You receive an immediate tax deduction when you make your contribution.
  • Your deduction is the maximum allowed by law. You receive the full fair market value of your gift. For gifts of cash, up to 50% of adjusted gross income (AGI), and for gifts of appreciated securities, mutual funds, real estate, etc., up to 30% of your adjusted gross income for the year.
  • Charitable deductions in excess of AGI limits can be carried for an additional five (5) years beyond the year in which you make the gift.
  • Avoid capital gains on donations of long-term appreciated securities.
  • Reduction in tax liability in peak earning years -Since there is no limit on annual contributions into a donor advised fund, every contribution you make to your donor advised fund can be deducted from that year’s federal income taxes.  You have the ability to selectively reduce your taxes in peak earning years.
  • The ability to give more over time – any potential growth in assets is tax-free in your donor advised fund account which provides the potential for greater charitable gifts.
  • Donate now, decide later – Your fund gives you time to define your charitable goals and identify which charities will receive the proceeds without year-end tax pressures.

 Comparing tax savings from donated appreciated securities

Suppose you have 1,000 shares of stock that you purchased 15 years ago (thus, you’re in long term capital gains territory). Assume that you purchased the stock for $10 per share and it is now worth $100 per share. Now, let’s compare the cost to the donor of making a contribution of $100,000 to a charity of your choice. We assume a 35% income tax rate and 15% long term capital gains tax rate.

 Option 1: Contribute cash from sale of securities

  • Immediate cost of donation: $100,000
  • Capital gains tax incurred: $13,500 (15% times ($100k minus $10k))
  • Income tax saved: ($35,000) (35% times $100k)

Net cost to donor: $78,500

Option 2: Contribute appreciated securities to donor advised fund

  • Immediate cost of donation: $100,000
  • Capital gains tax incurred: NA (15% times $100k minus $10k)
  • Income tax saved: ($35,000) (35% times $100k)

Net cost to donor: $65,000

Thus, you can effectively contribute $100,000 to the public charity of your choice for $13,500 less in actual donor cost by using the donor advised fund.