No estate tax is one of the major reasons that donors select donor advised funds (DAFs) as a gifting vehicle.The donor will incur no estate tax on gifts within the fund. Four additional tax benefits include:

1. You receive an immediate income tax deduction in the year you contribute to your DAF. Since AEF is a public charity, contributions immediately qualify for maximum income tax benefits. The IRS does mandate some limitations, depending upon your adjusted gross income (AGI):

  • 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

2. You will incur no capital gains tax on gifts of appreciated assets (i.e. securities, real estate, other illiquid assets).

3. Your investments in a DAF can appreciate tax-free.

4. If you are subject to alternative minimum tax (AMT), your contribution will reduce your AMT impact.

Other Tax Considerations

Donors can deduct the full market value of certain contributed assets, subject to the AGI limitations listed above. These assets include:

  • Closely held stock (C-corp or S-corp)
  • Real estate

Note: The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.

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