I have a heart to give, but I don’t always have the cash to do so. Luckily for me and for others like me, I can donate stock and other assets to my favorite charities in order to fulfill my donative intent. Instead of selling stock and donating the proceeds from the sale, I can donate appreciated stock to a qualified charity without subjecting myself to capital gains tax. Moreover, I can take an income tax deduction for the charitable contribution. And the qualified charity also benefit from the arrangement. The qualified charity can sell the stock without paying income tax (as a tax-exempt organization) and use the proceeds to assist with the organization’s financial operations.

I can also use donor-advised funds (DAFs) to achieve my donative intent. In 2017,The Tax Cuts and Jobs Act increased the standard deduction. It almost doubled the deduction for taxpayers. The 2021 standard deduction is $12,550 for singles, and $25,100 for married couples. This increased deduction in effect eliminated many taxpayer’s ability to itemize deductions on their individual income tax return. Charitable Contributions is a very popular itemized deduction. So the change in the itemized threshold not only threatened the ability to deduct the contributions, it also jeopardized the amount of contributions charities would receive.

As a result in the tax law changes, tax planners developed a concept called bunching in order to take itemized deductions. Bunching involves consolidating tax-deductible charitable contributions that would normally be made over multiple years into a single tax year. In the consolidated year, the donor contributes to a charitable giving vehicle, such as a donor-advised fund. The donor will receive an immediate tax deduction by itemizing on their federal income tax return. DAFs are an attractive planned giving vehicle because it allows the donor to designate grants from the DAFs to qualified charities over a period of years.

While most of you may give to charity on a regular basis through your local faith communities, your local service organizations (Harvesters, Operation Breakthrough), or national organizations (The Salvation Army or Red Cross), you may not be familiar with the concept of public foundations. Most metropolitan communities have public foundations that assist with charitable giving goals.

Be sure to review My Legacy Experience Podcast – A Discussion about Charitable Giving Goals, for a full discussion on DAFs and other Charitable Contribution Considerations.

My comments are for educational purposes only and should not be construed as specific legal advice.