New Reasons to set up Donor Advised Fund

With the new standard deduction set at $12,000 for single filers or $24,000 for married filers, less people will be able to itemize their deductions. Bunching deductions into one year has always been a tax strategy so you itemize one year and take the standard the following year.  This is not very popular because most people want to donate to charity every year and state and local governments expect their tax payments every year.

A Donor Advised Fund can be a great way to get a deduction for your contributions. With a Donor Advised Fund, you can put a lump sum of money into a fund and then at your discretion, over several years you can distribute the fund to charities of your choosing.  You get the charitable contribution when you contribute to the fund, not when you distribute the funds to your favorite charities.

For example, in 2018 you can establish a donor advisor fund by contributing $25,000 to this fund. You decide to give $5,000 to your church in 2018, 2019, 2020, 2021 and 2022.  You will get a $25,000 charitable contribution in 2018 (and no charitable donation in years 2019-2022 for contributions made out of this fund).  By taking the $25,000 charitable contribution in 2018, you can also itemize up to $10,000 of state and local taxes, your home mortgage interest, and significant medical expenses.

A donor advised fund can be an effective way to save even more on your taxes. Talk to your financial advisor to set up your Donor Advised fund.

Karena Sylvester, CPA


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