How to grow your charitable giving by bundling tax savings
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Many donors elect to use a donor-advised fund at the community foundation as an organizing tool, frequently recommending grants to their favorite charities in ways that mirror the ways they would make donations outright. Often, contributions to a donor-advised fund are in the form of highly-appreciated stock or other hard-to-value assets that generate a favorable tax outcome. Using a donor-advised fund in this way is very effective to get resources into the hands of the nonprofits who need it to fulfill their missions.
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Because the charitable income tax deduction is not currently available to taxpayers who do not itemize, however, you may worry that you have less incentive to give to charities during certain years. A donor-advised fund can help with that. Consider a situation where you have a high-income year and you make a large contribution to your donor-advised fund in that year. You are able to benefit from the charitable deduction because you are eligible to itemize deductions on that year’s tax return. Let’s assume, then, that your income is lower in the next two years; therefore, you do not itemize deductions. This means you have a reduced tax incentive to support charities, although you have loads of philanthropic incentive!
In this situation, the “bunching” strategy you deployed in year one allows you to support charities from your donor-advised fund in years one, year two, and year three. This technique creates important financial motivation to complement your philanthropic motivation. This, in turn, keeps your giving strong and steady across the years, which is very much appreciated by the charities you support.
The Peninsula Community Foundation is happy to help you develop a charitable giving plan that meets both your tax planning objectives as well as your desire to support the charities you love. Contact us at mmonteith@pcfvirginia.org or call us at 757 327-0862.
The team at the Peninsula Community Foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.
In this situation, the “bunching” strategy you deployed in year one allows you to support charities from your donor-advised fund in years one, year two, and year three. This technique creates important financial motivation to complement your philanthropic motivation. This, in turn, keeps your giving strong and steady across the years, which is very much appreciated by the charities you support.
The Peninsula Community Foundation is happy to help you develop a charitable giving plan that meets both your tax planning objectives as well as your desire to support the charities you love. Contact us at mmonteith@pcfvirginia.org or call us at 757 327-0862.
The team at the Peninsula Community Foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.
For more information about establishing a fund, please contact Michael Monteith, Email/757.327.0862
