Year-End Tax Check-UpSubmitted by American Endowment Foundation on November 6th, 2014
By Eric Kinaitis
As the end of the year approaches, how well do your clients’ know their personal “tax landscape?”
From income changes to changes in family size; from growth in capital gains to the potential impact of alternative minimum tax; from the annual hunt for additional tax deductions and the proverbial “shoebox” of unorganized receipts, how well your clients are prepared can directly impact how well you are able to serve them.
A recent article in Forbes touched upon charitable contributions as one way to engage in smarter tax planning. Educating your client on how a donor advised fund can serve their interests of tax savings may help solidify your role as their trusted advisor.
Donor advised funds (DAFs) are a tool that can serve the tax reduction needs of your clients in the following ways:
- The client can receive an immediate income tax deduction in the year they contribute to their donor advised fund. Since a DAF is administered by a public charity, contributions immediately qualify for maximum income tax benefits. The IRS does mandate some limitations, depending upon the adjusted gross income (AGI) of the donor:
- Deduction for cash – up to 60 % of AGI.
- Deduction for securities and other appreciated assets – up to 30 % of AGI.
- There is a five-year carry-forward for unused deductions.
Helping your client plan how to best use their income tax deduction can pay dividends this year and on into the future.
- The client will incur no capital gains tax on gifts of appreciated assets held longer than one year (i.e. securities, real estate, other illiquid assets.)
- A donor advised fund will not be subject to estate taxes.
- The investments in a DAF can appreciate tax-free.
- If your client is subject to alternative minimum tax (AMT), their contribution into a DAF will reduce their AMT impact.
Certain assets, such as closely-held stock and real estate, can allow a donor to enjoy the full-market value of the assets as a deduction (subject to the AGI limitations mentioned previously.)
Regardless of your client and their situation, contact us or call us at 1-888-660-4508 at American Endowment Foundation and learn more about how a donor advised fund may prove to be the right tool for their year-end tax planning.