DAF Suggested?

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duckfan101
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Joined: Wed Mar 28, 2018 1:42 pm

DAF Suggested?

Post by duckfan101 » Sun Apr 22, 2018 6:44 pm

Curious if anyone could share their wisdom to my particular situation.

Our married income is somewhere near 80k with a pastoral job and side hustle. With housing allowance, (and retirement) our taxable number is much much smaller. We even qualified for the Savers Credit last year (and would like to do the same this year).

SALARY:
45k - pastoral job
45k - side hustle

Our giving last year was 17k (majority to local church). If I were to follow the same trend and considering the new tax laws wouldn't I be losing out in that some giving would be taxed? Any advice or wisdom?

I'm very interested in a DAF but not sure how this could work with tithing/giving to our local church on a monthly basis. Anyone in a similar situation and know the route I ought to take?

fabdog
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Re: DAF Suggested?

Post by fabdog » Sun Apr 22, 2018 7:24 pm

The donor advised fund would be able to handle monthly donations you direct to a church.

However, it's not clear how this would help you, unless you planned to "bunch" 2 or more years of your $17K gifts in one year so that you could itemize deductions

Given the new tax rules your standard deduction is now $24K, so unless you have deductions over that amount, you'll still use the standard

so putting $17K into a DAF instead of directly donating it will not produce a different result. You'll still have a $17K charitable donation, and still not itemize (assuming your property taxes/interest, etc) don't carry you over

So where folks are using the DAF is in your example, bundling 3 years of contributions into the DAF at one go, in your case $51K, then itemizing in that year, and then using the DAF to distribute the money as they request over time.

Hope that helps

Mike

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dm200
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Re: DAF Suggested?

Post by dm200 » Sun Apr 22, 2018 7:37 pm

A DAF might help if you have appreciated assets to donate and want to spread the "grants" over a regular series.

Another factor is that others can make donations to YOUR DAF - and you can request the grants.

duckfan101
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Joined: Wed Mar 28, 2018 1:42 pm

Re: DAF Suggested?

Post by duckfan101 » Sun Apr 22, 2018 7:46 pm

fabdog wrote:
Sun Apr 22, 2018 7:24 pm
The donor advised fund would be able to handle monthly donations you direct to a church.

However, it's not clear how this would help you, unless you planned to "bunch" 2 or more years of your $17K gifts in one year so that you could itemize deductions

Given the new tax rules your standard deduction is now $24K, so unless you have deductions over that amount, you'll still use the standard

so putting $17K into a DAF instead of directly donating it will not produce a different result. You'll still have a $17K charitable donation, and still not itemize (assuming your property taxes/interest, etc) don't carry you over

So where folks are using the DAF is in your example, bundling 3 years of contributions into the DAF at one go, in your case $51K, then itemizing in that year, and then using the DAF to distribute the money as they request over time.

Hope that helps

Mike
This does make sense. Thanks!

Is there a more optimal number of giving that is lower than what I currently suggested? When do I start not benefitting tax wise for the giving?

CRC301
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Re: DAF Suggested?

Post by CRC301 » Sun Apr 22, 2018 7:48 pm

If you're only going to make charitable donations to one place and do so annually, the DAF doesn't buy you much in most situations. Where the DAF is nice is if you are donating to more than one place, trying to bunch contributions for tax benefits, or you want to donate appreciated assets (i.e. stocks) and the org you want to donate to does not accept appreciated assets as donations. For the latter case, donate the appreciated asset to the DAF, turn it into cash, then issue a cash grant to the org that didn't accept appreciated assets.

Also important: charitable contributions have AGI limits! You'll probably be fine with cash donations but appreciated assets have a 20% or 30% AGI limit for a single year. You can carry forward any amount over that if you choose though.

cherijoh
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Location: Charlotte NC

Re: DAF Suggested?

Post by cherijoh » Sun Apr 22, 2018 7:56 pm

duckfan101 wrote:
Sun Apr 22, 2018 6:44 pm
Curious if anyone could share their wisdom to my particular situation.

Our married income is somewhere near 80k with a pastoral job and side hustle. With housing allowance, (and retirement) our taxable number is much much smaller. We even qualified for the Savers Credit last year (and would like to do the same this year).

SALARY:
45k - pastoral job
45k - side hustle

Our giving last year was 17k (majority to local church). If I were to follow the same trend and considering the new tax laws wouldn't I be losing out in that some giving would be taxed? Any advice or wisdom?

I'm very interested in a DAF but not sure how this could work with tithing/giving to our local church on a monthly basis. Anyone in a similar situation and know the route I ought to take?
How much were your Itemized deductions in 2017? Did you pay more that $10K property taxes and state taxes? I expect you will be losing some of the previous subsidy for your charitable giving, but possibly not as much as you think.

BTW, I had to chuckle at "pastoral job" and "side hustle" being used in the same sentence. :D

motorcyclesarecool
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Re: DAF Suggested?

Post by motorcyclesarecool » Sun Apr 22, 2018 8:09 pm

One tax advantage of a DAF that you get irrespective of deductions is the ability to avoid incurring a capital gain. (You’d have to have a pretty high income to be beyond the 0% long term capital gain bracket)

A strategy I’m currently pursuing is making a biweekly automatic taxable contribution equivalent to my regular giving. When the market goes up, I donate appreciated shares. When the market goes down, I harvest the tax losses (Reducing my ordinary income by up to $3000 per year) and donate the cash to my DAF. It will allow me to get some tax benefit from my charitable activity. Otherwise, I’d have to give at least $24,000 in a year to get a benefit on my taxes. Of course, I give of my earthly treasure for reasons beyond a deduction.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

duckfan101
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Joined: Wed Mar 28, 2018 1:42 pm

Re: DAF Suggested?

Post by duckfan101 » Sun Apr 22, 2018 11:09 pm

motorcyclesarecool wrote:
Sun Apr 22, 2018 8:09 pm
One tax advantage of a DAF that you get irrespective of deductions is the ability to avoid incurring a capital gain. (You’d have to have a pretty high income to be beyond the 0% long term capital gain bracket)

A strategy I’m currently pursuing is making a biweekly automatic taxable contribution equivalent to my regular giving. When the market goes up, I donate appreciated shares. When the market goes down, I harvest the tax losses (Reducing my ordinary income by up to $3000 per year) and donate the cash to my DAF. It will allow me to get some tax benefit from my charitable activity. Otherwise, I’d have to give at least $24,000 in a year to get a benefit on my taxes. Of course, I give of my earthly treasure for reasons beyond a deduction.
Whoa, very cool. But as I understand, you aren't using a DAF for this strategy.

If you don't mind me asking, how much did you seed this account to begin with?

johan851
Posts: 109
Joined: Sun Apr 17, 2011 12:59 pm

Re: DAF Suggested?

Post by johan851 » Sun Apr 22, 2018 11:49 pm

motorcyclesarecool wrote:
Sun Apr 22, 2018 8:09 pm
One tax advantage of a DAF that you get irrespective of deductions is the ability to avoid incurring a capital gain. (You’d have to have a pretty high income to be beyond the 0% long term capital gain bracket)

A strategy I’m currently pursuing is making a biweekly automatic taxable contribution equivalent to my regular giving. When the market goes up, I donate appreciated shares. When the market goes down, I harvest the tax losses (Reducing my ordinary income by up to $3000 per year) and donate the cash to my DAF. It will allow me to get some tax benefit from my charitable activity. Otherwise, I’d have to give at least $24,000 in a year to get a benefit on my taxes. Of course, I give of my earthly treasure for reasons beyond a deduction.
Exactly. I'm using a DAF for this strategy starting this year because many small organizations have a hard time accepting gifts of securities. The DAF has no problem accepting those shares and then cutting the organization a check. Easier for everyone (me included).

motorcyclesarecool
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Re: DAF Suggested?

Post by motorcyclesarecool » Mon Apr 23, 2018 5:20 am

duckfan101 wrote:
Sun Apr 22, 2018 11:09 pm
Whoa, very cool. But as I understand, you aren't using a DAF for this strategy.

If you don't mind me asking, how much did you seed this account to begin with?
My taxable account or my DAF?
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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Rainier
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Re: DAF Suggested?

Post by Rainier » Mon Apr 23, 2018 5:28 am

I presume you pay some state tax as well (assume your housing is free, if not, mortgage interest is also deductible).

You can take a deduction for state and local taxes up to $10k, so now your hurdle for a tax deduction is only $14k, assuming you use the full $10k and you almost certainly do not.

Agree that bunching your donations makes the most sense then you can give monthly or whatever from your DAF.

not4me
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Re: DAF Suggested?

Post by not4me » Mon Apr 23, 2018 8:44 am

Realizing that coming up with the lump sum may be difficult, there is another advantage once that is done. While those funds are in a daf, they are "invested" in something & any gains aren't taxable to you. So, even with something like a money market fund, there will be small gains. Over time, that gives you more to donate. There are several places to house the daf & you'd want to make sure their expenses (& contribution thresholds) will pencil out ok

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dm200
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Re: DAF Suggested?

Post by dm200 » Mon Apr 23, 2018 10:04 am

Probably not applicable to OP, but the ability to make anonymous donations is a great way to fund what you believe are deserving organizations -- and not get on the mail/email/phone lists for more. I send $50-$100 a year, for example, to a very small rural church in my hometown where my, now deceased, relatives were pillars of that church for 100 years. As they should, they always send an acknowledgement - in the mail. By, now, making an anonymous donation - they cannot send an acknowledgement - and they save paper, time and postage.

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dm200
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Re: DAF Suggested?

Post by dm200 » Mon Apr 23, 2018 10:07 am

not4me wrote:
Mon Apr 23, 2018 8:44 am
Realizing that coming up with the lump sum may be difficult, there is another advantage once that is done. While those funds are in a daf, they are "invested" in something & any gains aren't taxable to you. So, even with something like a money market fund, there will be small gains. Over time, that gives you more to donate. There are several places to house the daf & you'd want to make sure their expenses (& contribution thresholds) will pencil out ok
A DAF invested balance can be stretched out for a very long time - say, for example, requesting grants of about 4% or so of the balance each year - perhaps more some years than others. You can name successors to request the grants long after you are unable to do so or die. We, for example, named our son - he doesn;t know it yet -- BUT since he is soon getting married, we will have the discussion soon with him and his soon to be wife.

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