Donor advised funds (DAFs) provide five primary tax benefits to the donor:

  1. Income Tax: You 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. The IRS does mandate some limitations, depending upon your adjusted gross income (AGI):
    1. Deduction for cash – up to 60 % of AGI.
    2. Deduction for securities and other appreciated assets – up to 30 % of AGI.
    3. There is a five-year carry-forward for unused deductions.
  2. Capital Gains Tax: You will incur no capital gains tax on gifts of appreciated assets (i.e. securities, real estate, other illiquid assets.)
  3. Estate Tax: Your DAF will not be subject to estate taxes.
  4. Tax-Free Growth: Your investments in a DAF can appreciate tax-free.
  5. Alternative Minimum Tax (AMT): 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.

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