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DAFs are great for giving. The 2018 tax law changes increased the standard deduction and limited itemized deductions. This is certain to depress charitable giv
by millstone 8y ago
DAFs are great for giving.
The 2018 tax law changes increased the standard deduction and limited itemized deductions. This is certain to depress charitable giving, and DAFs are one thing that will help protect it.
The reason is they allow donors to separately time the tax benefit from fund disbursement. Say you wish to donate $10k a year to charity. In 2018, this may not provide any tax deduction! However a DAF allows you to make a much larger donation of $100k, realize a tax deduction, and then dish it out in $10k increments over the years.
DAFs also shields donors from providing contact info to the charity, allowing donors to escape the never-ending solicitation mail and calls. (Charities really dislike this, for obvious reasons.)
The concerns about money sitting in DAFs is overblown. A charity with an endowment also has money that "sits" and isn't being spent, but you wouldn't describe that as a "black hole."
- TAForObvReasons 8y ago> But it is notable that the biggest recipient of DAFs’ gifts is none other than Fidelity [Charitable]. The third-biggest is the American Endowment Foundation, another DAF supplier. In practice, money is for the most part churning between DAFs, not actually being "spent". https://www.economist.com/finance-and-economics/2017/03/23/a-philanthropic-boom-donor-advised-funds https://www.economist.com/finance-and-economics/2017/03/23/a...
- skybrian 8y agoSeems like a large donation wouldn't be deductable due to AMT? Particularly when there are high state taxes.
- jefftk 8y agoThe AMT excludes many deductions, but it doesn't exclude the charitable deduction.
- toast0 8y agoIn addition to charitable deductions being deductable for AMT, you may also want to know deductions for state and local taxes are very limited in the 2018 tax year (and beyond), so AMT is likely to mostly disappear (if it wasn't abolished for individuals? There was some talk of that, but I didn't follow up, because state tax was my big deduction)