You may have noticed that recent changes in the tax code have done much to destroy the benefits of church and other tax-deductible 501(c)(3) donations. In this article, we will discuss a way to donate the way you want, and receive the tax benefits you deserve.
This tool has become an increasingly popular way to donate to your church or other501(c)(3) organizations. In fact, as of 2020, there were over one million of these donor-advised fund accounts in existence!
National investment firms such as Fidelity, Schwab, and Vanguard have all created donor-advised funds. These "commercial" donor-advised funds hire an affiliated for-profit investment firm to manage the assets in the accounts for a fee that varies based on the account balance.
Example: You donate $100,000.00 to the fund today. You get the $100,000.00 deduction now. From the fund, you donate $10,000.00 a year to your church (probably more as your money in the fund grows tax-free).
You can also establish a donor-advised fund account with a community foundation that has a local orientation; a single-issue non-profit, such as a university or an environmental charity like the Sierra Club; or an independent, non-commercial organization such as the American Endowment Foundation, National Philanthropic Trust, or United Charitable.
You can always donate cash, including money in IRA's and 401(k)s, to your donor-advised fund account. But many donor-advised funds also accept non-cash donations, including:
• Stocks, bonds, and mutual fund shares
• Real estate
• Privately owned company stock
• LLC and limited partnership interests
• Bitcoin and other cryptocurrency
• Life insurance
Donating stock or mutual fund shares that have appreciated is a great tax strategy. Here's why:
• If you owned the stock for more than one year, you get a deduction equal to its fair market value at the time of the donation.
• You don't pay and capital gains tax on the appreciated value of the stock
Example: Let's say you own $1,000.00 shares of Evergreen stock that is publicly traded on NASDAQ. You paid $10,000.00 for the stock back in 2010, and the shares are worth $100,000.00 today.
You establish a donor-advised fund in 2022 and donate the stock.
• You get a $100,000.00 charitable deduction for 2022
• You pay no federal tax on the 90,000.00 gain.
As you can see, there are many benefits to donor-advised funds for the charitably inclined, and few drawbacks! If you would like to discuss your options for maximizing the tax benefits or your donations, click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.
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