Donor advised funds, also called DAFs, are popular charitable giving vehicles—known for their ease and flexibility. Through a donor advised fund, individuals can make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. Many donors have established donor advised funds at the Community Foundation of Johnson County to streamline their giving and maximize their impact.
The CFJC provides two types of donor-advised funds (DAFs): non-endowed and endowed. Endowed donor advised funds are invested, allowing any investment gains to grow tax-free. Donors can allocate up to 5% of the fund annually. The advantage of an endowed donor advised fund is that it ensures a lasting impact. Gifts to endowed DAFs may be eligible for the Endow Iowa Tax Credit. Non-endowed donor advised funds offer immediate impact, as all funds are available for allocation at any time.
There are many benefits to establishing a donor advised fund:
Simplified taxes: If you regularly give to multiple nonprofits, you might benefit from streamlining your giving through a donor advised fund. By using a donor advised fund, you can make one gift into your fund and have just one tax receipt come tax time. You can then use your donor advised fund to grant to any 501(c)(3) public charity.
Streamlined giving: By centralizing your charitable giving, you can manage all your giving from one convenient account. You focus on giving – we handle all the accounting, legal, and investment services.
Donate complex assets: You can contribute to your fund using a broad range of assets, including cash, publicly traded securities, mutual funds, real estate, and business interests. Some nonprofits don’t have the capacity to accept complex assets, but they’ll have no trouble accepting grants from your fund.
Community impact: The CFJC can help you design a giving strategy that connects your charitable interests with community needs.
Bundling: With the increased standard deduction, many taxpayers who used to itemize are now taking the standard deduction. If you’re on the cusp between itemizing and taking the standard deduction, you can enjoy the best of both worlds by condensing several years’ giving into a select year and itemizing to gain the maximum tax benefit, then taking the standard deduction during other years. This technique is known as “bundling.” Donor advised funds make it possible for you to bundle giving one year for a charitable tax deduction and then suggest grants out of that fund gradually over time so you can continue to provide ongoing support to your favorite charities while taking full advantage of your charitable deduction.
Family Philanthropy: Donor advised funds are a great tool for individuals who want to involve family in charitable giving. Children or grandchildren can participate in grantmaking by serving as Fund Advisors. Family members can also be named Successor Advisors to your fund so the next generation can carry on your charitable legacy. Additionally, donor advised funds are not subject to estate taxes.
As always, we are here to help your giving remain effective and easy. Contact us if you’re interested in learning more about the benefits of establishing a donor advised fund at the Community Foundation of Johnson County.
