There are several ways you can reduce your tax burden and increase the money available to help those in need, especially at year-end. If you have received a bonus, recently sold a business, or received an inheritance, this is an opportune time to set up a tax-efficient vehicle to make charitable giving more organized and strategic.
The most commonly used vehicles for philanthropy are private foundations, charitable lead trusts, and donor-advised funds (DAFs). DAFs are the fastest-growing charitable vehicle because they are the most flexible and efficient way to give.
No matter how you give, here are helpful suggestions for maximizing your philanthropy and minimizing your tax burden:
Donate appreciated long-term securities to maximize your tax savings. You can electronically transfer stock (DTC) to a 501(c)3 public charity and receive an acknowledgment for a tax deduction. Mutual Funds and ETFs may also be donated. You may claim a fair market value deduction of up to 30% of adjusted gross income and will not be subject to capital gains tax on the appreciated portion of the contribution. When you contribute assets to open a DAF, they can take an immediate tax deduction and make grants over time. Some DAFs allow fundholders to choose investments options, and any earnings are added to their DAF tax-free.
Think digital. Consider using crypto-currencies for making donations directly to charities, or use these assets to fund charitable vehicles like donor-advised funds. Most charities have made it quick and easy to contribute online.
Fifty years of experience in charitable giving has proved that the best option at year-end is to establish a donor-advised fund (DAF). It’s quick, easy, and helps people maximize their tax benefits and their philanthropy.
Donor-advised funds make giving streamlined and tax-efficient. A DAF at Jewish Communal Fund could help organize your charitable giving and eliminate the worry of recordkeeping and saving receipts. Plus, you have the peace of mind that you are receiving JCF’s excellent customer service. In fact, even if you have not have itemized since the enactment in 2018 of the Tax Cuts and Jobs Act that significantly increased the standard deduction, you can still benefit from a DAF.
Use a DAF to “bunch” and accelerate giving. Charitably inclined individuals can employ a tactic known as “bunching,” setting aside several years’ worth of charitable contributions into one taxable year so that the itemized deductions in that year would exceed the amount of the standard deduction. Contributions to a donor-advised fund such as JCF allow you to pace actual donations to charitable organizations over time, while still achieving the tax benefit of this “bunching” strategy. Once the DAF is established, fundholders have the flexibility to easily make grants to IRS-qualified public charities in all sectors.
Terminate a private foundation using a DAF. Eliminate the expense and burden of a private foundation. Transferring foundation assets to a DAF frees clients from the administrative and reporting requirements. Unlike private foundations, DAFs report in the aggregate, ensuring confidentiality and protecting fundholders’ privacy.
Organize your giving. DAFs can be managed on a secure website that provides access to account information and grant-making at any time. The DAF sponsor keeps track of all of the grants, eliminating receipts from multiple charities. Fundholders have the flexibility to set their own timetable for making grants to the IRS-qualified charities of their choosing.
If you are looking to maximize the impact of your giving, choose a donor-advised fund that reflects your values. Jewish Communal Fund leverages the participation of its fundholders by making an annual major gift to the UJA-Federation of NY. Additionally, our endowment, the Special Gifts Fund, makes grants to projects and organizations in the New York Jewish community, such as support for kosher food pantries and services for the elderly. Furthermore, JCF offers mission-aligned investments that reflect our Jewish values.