Tax Advantages of Donor Advised Funds

Tax Advantages of Donor Advised Funds
April 3, 2023

By:  Susan Kjellqvist, Director of Development

As tax season approaches, many of us are looking for ways to make the most of our charitable giving. One option to consider is giving through a Donor Advised Fund (DAF). LCI receives many donations through DAFs each year, and our donors enjoy some attractive tax benefits by doing so.

A DAF is a philanthropic vehicle that allows you to make one contribution into the fund and then recommend grants distributed to multiple charities over time. This can simplify your giving and make it easier to support Lung Cancer Initiative and other causes you care about—in addition to enjoying some tax benefits:

  1. Immediate Tax Deduction: When you contribute to a DAF, you can generally take an immediate tax deduction for the full amount of your gift. This can be especially beneficial if you have a high income year or if you anticipate that your tax bracket will be higher in the future.
  2. Avoid Capital Gains Taxes: Appreciated securities can be gifted into the DAF to avoid capital gains on the sale of the securities.
  3. Tax-Free Growth: Once you contribute to a DAF, the assets in the fund can grow tax-free. This means that your contribution can potentially grow over time, allowing you to give more to the Lung Cancer Initiative and other charities in the future.
  4. Tax Benefits of Planned Gifts: You can also enjoy tax benefits now by making a planned gift through a DAF. You would simply designate your charity of choice as a beneficiary of your DAF in your estate plan, and your planned gift would be eligible for an immediate tax deduction. Then, in later years when your estate makes a contribution through the DAF, there may be estate or inheritance tax benefits.

We encourage you to consider giving through a Donor Advised Fund this tax season and throughout the year. If you have any questions or would like to learn more, please don’t hesitate to reach out to our team at the Lung Cancer Initiative or your investment advisor.

For more 2023 charitable giving tax saving tips, check out this article provided courtesy of Charles Schwab Charitable.