A donor advised fund allows you to receive an immediate income tax deduction in the year you contribute to your DAF. Since AEF is a public charity, contributions immediately qualify for maximum income tax benefits, providing donors with the ability to lower their federal and state income tax. The IRS does mandate some limitations, depending upon your adjusted gross income (AGI):
- Deduction for cash – up to 60 % of AGI.
- Deduction for securities and other appreciated assets – up to 30 % of AGI.
- There is a five-year carry-forward for unused deductions.
Donor advised funds (DAFs) provide four other tax benefits to the donor:
- You will incur no capital gains tax on gifts of appreciated assets (i.e. securities, real estate, other illiquid assets.)
- Your donor advised fund will not be subject to estate taxes.
- Your investments in a DAF can appreciate tax-free.
- If you are subject to alternative minimum tax (AMT), your contribution will reduce your AMT impact.
Other Tax Considerations
Donors can deduct the full market value of certain contributed assets, subject to the AGI limitations listed above. These assets include:
- Closely held stock (C-corp or S-corp)
- Real estate
Compare a Private Foundation and a Donor Advised Fund
Note: The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.
