A donor-advised fund (DAF) allows you to receive an income tax deduction the year you contribute. Since American Endowment Foundation (AEF) is a public charity, contributions immediately qualify for income tax benefits, giving donors the opportunity to lower their federal and state income taxes.

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.
  • A five-year carry-forward for unused deductions.

Additional Tax Benefits to DAF Donors

DAFs provide four other tax benefits to donors:

  1. They will incur no capital gains tax on gifts of appreciated assets (e.g., securities, real estate, other illiquid assets).
  2. Their DAF will not be subject to estate taxes.
  3. Investments in a DAF can appreciate tax-free.*
  4. If they are subject to alternative minimum tax (AMT), their contributions will reduce AMT impact.

Other Considerations with Taxes & DAFs

Donors can deduct the fair 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

For more information on how charitable giving impacts your income taxes, it’s worth comparing DAFs and private foundations.

To learn more about setting up a DAF at AEF, call 1-888-440-4233 or contact us online.

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.

*Select investments may be subject to Unrelated Business Income Tax (UBIT). Please contact AEF or your tax advisor for more information.