4 ms·

If you’re going to be making donations in the thousands-of-dollars range in the US, set up a donor-advised fund. You donate appreciated assets to the fund, and

If you’re going to be making donations in the thousands-of-dollars range in the US, set up a donor-advised fund. You donate appreciated assets to the fund, and direct the fund to cut checks to the charities you want to support (this saves small local charities from having to deal with gifts of stock, while preserving your tax advantages of doing so, which far outweigh the credit card points). Many employers will match donations from a DAF that you control, so you keep that, too. We have one with vanguard charitable, which was easy to set-up and fund (minimum $25k, IIRC), but there’s several good alternatives.

the-rc 7y ago
To expand: the more a stock has grown since you got it, the higher the tax advantage, because you get to deduct the full market value, not the cash you're left with after capital gain taxes. So pick your lots carefully. Also, if you know in advance your income will be higher than in the future (one time events, etc.), you can transfer the shares now, invest the cash in the fund as you see fit and distribute it over the following years. Another practical benefit is that it allows you to make small donations to tens of nonprofits without fearing you'll be drowning later in fundraising letters, by virtue of not passing your home address along.
- stephencanon 7y ago
  And also lets you make many small donations without the headache of many stock transactions to reconcile (which for me is more annoying than the letters).
alexhutcheson 7y ago
This is great advice. Other advantages of DAFs: - Super easy donation process - log in, search for the nonprofit you want to give to, click a couple buttons and you're done. Even lower friction than going to the nonprofit's website and entering credit card info. - If you don't already itemize your tax deductions every year, you can "bunch" several years of charitable giving into one year by contributing in advance for future years. For example, if you plan to donate $5k per year, you can contribute $15k to your DAF this year, but grant $5k out of the fund each year. You can itemize the contribution in the first year, while taking the standard deduction in the 2nd and 3rd years. - Fewer things to track and list when you do your taxes. You only need to report your contributions into the DAF (often 1 or fewer per year), so you no longer have to scour your records and record each individual charitable donation you made. [not an accountant nor a lawyer, not tax or investing advice] Vanguard, Schwab, and Fidelity all have low-cost DAF options that you can set up online in a couple minutes. Annual fees, minimum contributions, and minimum grants vary by provider so it's worth doing a little bit of research.
- stephencanon 7y ago
  The point about "bunching" donations is really interesting, and a very savvy option for people whose annual donations are a little below the threshold for itemizing deductions. Thanks for pointing that out!
astura 7y ago
DAFs also allow you to take several years worth of deductions in one year, which can have tax advantages of you time it correctly. (Take the deduction during your highest tax bracket years) Less of an advantage with the new tax law, since so many people would still fall under the standard deduction.

the-rc 7y ago

To expand: the more a stock has grown since you got it, the higher the tax advantage, because you get to deduct the full market value, not the cash you're left with after capital gain taxes. So pick your lots carefully. Also, if you know in advance your income will be higher than in the future (one time events, etc.), you can transfer the shares now, invest the cash in the fund as you see fit and distribute it over the following years. Another practical benefit is that it allows you to make small donations to tens of nonprofits without fearing you'll be drowning later in fundraising letters, by virtue of not passing your home address along.

stephencanon 7y ago
And also lets you make many small donations without the headache of many stock transactions to reconcile (which for me is more annoying than the letters).

alexhutcheson 7y ago

This is great advice. Other advantages of DAFs: - Super easy donation process - log in, search for the nonprofit you want to give to, click a couple buttons and you're done. Even lower friction than going to the nonprofit's website and entering credit card info. - If you don't already itemize your tax deductions every year, you can "bunch" several years of charitable giving into one year by contributing in advance for future years. For example, if you plan to donate $5k per year, you can contribute $15k to your DAF this year, but grant $5k out of the fund each year. You can itemize the contribution in the first year, while taking the standard deduction in the 2nd and 3rd years. - Fewer things to track and list when you do your taxes. You only need to report your contributions into the DAF (often 1 or fewer per year), so you no longer have to scour your records and record each individual charitable donation you made. [not an accountant nor a lawyer, not tax or investing advice] Vanguard, Schwab, and Fidelity all have low-cost DAF options that you can set up online in a couple minutes. Annual fees, minimum contributions, and minimum grants vary by provider so it's worth doing a little bit of research.

stephencanon 7y ago
The point about "bunching" donations is really interesting, and a very savvy option for people whose annual donations are a little below the threshold for itemizing deductions. Thanks for pointing that out!

astura 7y ago

DAFs also allow you to take several years worth of deductions in one year, which can have tax advantages of you time it correctly. (Take the deduction during your highest tax bracket years) Less of an advantage with the new tax law, since so many people would still fall under the standard deduction.