Donor Advised Fund for 2018 Planned Donations?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
paulsalem
Posts: 20
Joined: Mon Feb 06, 2017 12:26 pm

Donor Advised Fund for 2018 Planned Donations?

Post by paulsalem » Fri Nov 24, 2017 2:31 pm

We may not exceed (or just barley) the standard deduction next year. We have already exceeded it this year. Is there any reason not to contribute to a donor advised fund this year for our 2018 giving?

User avatar
dm200
Posts: 18305
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Donor Advised Fund for 2018 Planned Donations?

Post by dm200 » Fri Nov 24, 2017 2:37 pm

paulsalem wrote:
Fri Nov 24, 2017 2:31 pm
We may not exceed (or just barley) the standard deduction next year. We have already exceeded it this year. Is there any reason not to contribute to a donor advised fund this year for our 2018 giving?
Depend on all the details, but your situation show one (of many) potential benefits of the use of a DAF.

aristotelian
Posts: 4673
Joined: Wed Jan 11, 2017 8:05 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by aristotelian » Fri Nov 24, 2017 2:49 pm

We doubled up.

LaurieAnnaT
Posts: 20
Joined: Fri Oct 27, 2017 11:31 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by LaurieAnnaT » Fri Nov 24, 2017 2:50 pm

Besides funding a donor advised fund this year, you might want to also look at making sure your state taxes are paid by the end of this year so that you get the benefit of the state income tax deduction against your higher income this year.

paulsalem
Posts: 20
Joined: Mon Feb 06, 2017 12:26 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by paulsalem » Fri Nov 24, 2017 3:02 pm

LaurieAnnaT wrote:
Fri Nov 24, 2017 2:50 pm
Besides funding a donor advised fund this year, you might want to also look at making sure your state taxes are paid by the end of this year so that you get the benefit of the state income tax deduction against your higher income this year.
Wow. Never thought about that. Thanks.

I'll probably get a small state refund. Can I pay my tax year 2018 state taxes in 2017 and get the deduction?

annielouise
Posts: 330
Joined: Wed May 14, 2008 4:11 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by annielouise » Fri Nov 24, 2017 4:17 pm

In the past, we would itemize every other year by doubling up both charity contribution to DAF and property tax ( pay one year in Jan and the next in December). Haven't done that in the last few years because we've had a mortgage.

User avatar
dm200
Posts: 18305
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Donor Advised Fund for 2018 Planned Donations?

Post by dm200 » Fri Nov 24, 2017 6:47 pm

It all depends on the jurisdiction, but what some folks do is double up on real estate taxes - on alternate years.

If you have tax deductible mortgage interest, you can also (one month's) have 13 month's deductible interest in the double up years and 11 months in alternate ones by paying slightly early in December of those years and in January on the others.

LaurieAnnaT
Posts: 20
Joined: Fri Oct 27, 2017 11:31 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by LaurieAnnaT » Fri Nov 24, 2017 9:00 pm

paulsalem wrote:
Fri Nov 24, 2017 3:02 pm
Can I pay my tax year 2018 state taxes in 2017 and get the deduction?
I don't know if states are set up to handle that.

By the way, if you have appreciated stock, consider using that to fund your donor advised fund. You get the tax deduction for the current value of the stock without having to recognize capital gains.

Gill
Posts: 4627
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Gill » Fri Nov 24, 2017 9:12 pm

LaurieAnnaT wrote:
Fri Nov 24, 2017 9:00 pm
paulsalem wrote:
Fri Nov 24, 2017 3:02 pm
Can I pay my tax year 2018 state taxes in 2017 and get the deduction?
I don't know if states are set up to handle that.

By the way, if you have appreciated stock, consider using that to fund your donor advised fund. You get the tax deduction for the current value of the stock without having to recognize capital gains.
Payment of state income tax is usually done through an estimated payment in December.

Also, keep in mind the gain must be long term.

Gill

User avatar
FIREchief
Posts: 2684
Joined: Fri Aug 19, 2016 6:40 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by FIREchief » Fri Nov 24, 2017 11:43 pm

Gill wrote:
Fri Nov 24, 2017 9:12 pm
LaurieAnnaT wrote:
Fri Nov 24, 2017 9:00 pm
paulsalem wrote:
Fri Nov 24, 2017 3:02 pm
Can I pay my tax year 2018 state taxes in 2017 and get the deduction?
I don't know if states are set up to handle that.

By the way, if you have appreciated stock, consider using that to fund your donor advised fund. You get the tax deduction for the current value of the stock without having to recognize capital gains.
Payment of state income tax is usually done through an estimated payment in December.

Also, keep in mind the gain must be long term.

Gill
He seems to be asking if he can make an estimated payment towards his 2018 state tax liability prior to year end 2017. This would likely involve submitting a payment/voucher for first quarter 2018 state taxes. I doubt any state would be set up for this, but if it worked it could be a very nice thing. :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

User avatar
FiveK
Posts: 5570
Joined: Sun Mar 16, 2014 2:43 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by FiveK » Sat Nov 25, 2017 12:59 am

FIREchief wrote:
Fri Nov 24, 2017 11:43 pm
This would likely involve submitting a payment/voucher for first quarter 2018 state taxes. I doubt any state would be set up for this....
Probably true. Of course, someone may know of a counterexample. ;)

One can send in an estimated 2017 state tax payment this year and add that to 2017 itemized deductions. If that causes a state tax refund (and was indeed fully deducted in 2017), the refund will be added to 2018 federal income.

Time value of money aside, this will be
- favorable if 2018 marginal rate is lower than 2017's
- neutral if 2017 and 2018 marginal rates are identical
- unfavorable if 2018 marginal rate is higher than 2017's.

paulsalem
Posts: 20
Joined: Mon Feb 06, 2017 12:26 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by paulsalem » Sat Nov 25, 2017 1:43 am

Isn't there a way to apply your state refund towards the following year's taxes?

Gill
Posts: 4627
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Gill » Sat Nov 25, 2017 8:11 am

paulsalem wrote:
Sat Nov 25, 2017 1:43 am
Isn't there a way to apply your state refund towards the following year's taxes?
Yes, but it’s a wash being both income and a deduction.
Gill

User avatar
PhysicianOnFIRE
Posts: 390
Joined: Fri Jan 08, 2016 3:46 pm
Location: Up North

Re: Donor Advised Fund for 2018 Planned Donations?

Post by PhysicianOnFIRE » Sat Nov 25, 2017 8:58 am

I think it's a good idea. There is some real uncertainty regarding the size of the standard deduction in the future. I donated to our DAF last week and don't plan on funding it next year.

:beer
-PoF

Chip
Posts: 2202
Joined: Wed Feb 21, 2007 4:57 am

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Chip » Sat Nov 25, 2017 9:15 am

FIREchief wrote:
Fri Nov 24, 2017 11:43 pm
He seems to be asking if he can make an estimated payment towards his 2018 state tax liability prior to year end 2017. This would likely involve submitting a payment/voucher for first quarter 2018 state taxes. I doubt any state would be set up for this, but if it worked it could be a very nice thing. :sharebeer
I have done this on and off for several years (I bunch deductions). My state is not set up for it, but I send in a payment with homemade 2018 estimated tax payment form. Certified mail, return receipt. They usually don't cash the check until well into the new year. One year they credited the payment to the wrong tax year.

This year I signed up for my state's electronic tax payment program (the equivalent of EFTPS). I'm hoping maybe I'll be able to use that system and make a clean payment for 2018. So far my hopes remain unfulfilled. :D

pshonore
Posts: 6421
Joined: Sun Jun 28, 2009 2:21 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by pshonore » Sat Nov 25, 2017 10:24 am

I think the IRS would definitely frown on paying State taxes in 2017 for 2018 income. Most states I am familiar with (not that many) that have an online payment system don't allow payments for a future year.

Chip
Posts: 2202
Joined: Wed Feb 21, 2007 4:57 am

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Chip » Sat Nov 25, 2017 11:25 am

pshonore wrote:
Sat Nov 25, 2017 10:24 am
I think the IRS would definitely frown on paying State taxes in 2017 for 2018 income. Most states I am familiar with (not that many) that have an online payment system don't allow payments for a future year.
From IRS Memorandum 200814022:

Section 164(a) provides for the deduction of the following taxes paid or accrued within the taxable year: (1) state and local real property taxes, (2) state and local personal property taxes, and (3) state and local income taxes. A payment of estimated income tax pursuant to state law constitutes the payment of a tax within the meaning of §164(a)(3) when the amount is based on a reasonable, good faith estimate of the taxpayer’s actual tax liability. SeeRev. Rul. 71-190, 1971-1 C.B. 70; Rev. Rul. 82-208, 1982-2 C.B. 58.

I will make a good faith estimate of my 2018 income and state income tax liability (and I've been pretty accurate in the past). My state will accept the payment. I'm guessing that means they don't think it's illegal.

Here's a post from November 2016 where a member here says that the CA online system was accepting estimated income tax payments for 2017.

User avatar
FIREchief
Posts: 2684
Joined: Fri Aug 19, 2016 6:40 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by FIREchief » Sat Nov 25, 2017 2:13 pm

Chip wrote:
Sat Nov 25, 2017 9:15 am
FIREchief wrote:
Fri Nov 24, 2017 11:43 pm
He seems to be asking if he can make an estimated payment towards his 2018 state tax liability prior to year end 2017. This would likely involve submitting a payment/voucher for first quarter 2018 state taxes. I doubt any state would be set up for this, but if it worked it could be a very nice thing. :sharebeer
I have done this on and off for several years (I bunch deductions). My state is not set up for it, but I send in a payment with homemade 2018 estimated tax payment form. Certified mail, return receipt. They usually don't cash the check until well into the new year. One year they credited the payment to the wrong tax year.

This year I signed up for my state's electronic tax payment program (the equivalent of EFTPS). I'm hoping maybe I'll be able to use that system and make a clean payment for 2018. So far my hopes remain unfulfilled. :D
Sound like you've bunched in three year groupings. Correct?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

User avatar
FIREchief
Posts: 2684
Joined: Fri Aug 19, 2016 6:40 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by FIREchief » Sat Nov 25, 2017 2:14 pm

Chip wrote:
Sat Nov 25, 2017 11:25 am
pshonore wrote:
Sat Nov 25, 2017 10:24 am
I think the IRS would definitely frown on paying State taxes in 2017 for 2018 income. Most states I am familiar with (not that many) that have an online payment system don't allow payments for a future year.
From IRS Memorandum 200814022:

Section 164(a) provides for the deduction of the following taxes paid or accrued within the taxable year: (1) state and local real property taxes, (2) state and local personal property taxes, and (3) state and local income taxes. A payment of estimated income tax pursuant to state law constitutes the payment of a tax within the meaning of §164(a)(3) when the amount is based on a reasonable, good faith estimate of the taxpayer’s actual tax liability. SeeRev. Rul. 71-190, 1971-1 C.B. 70; Rev. Rul. 82-208, 1982-2 C.B. 58.

I will make a good faith estimate of my 2018 income and state income tax liability (and I've been pretty accurate in the past). My state will accept the payment. I'm guessing that means they don't think it's illegal.

Here's a post from November 2016 where a member here says that the CA online system was accepting estimated income tax payments for 2017.
This is very interesting! :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Chip
Posts: 2202
Joined: Wed Feb 21, 2007 4:57 am

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Chip » Sat Nov 25, 2017 3:31 pm

FIREchief wrote:
Sat Nov 25, 2017 2:13 pm
Sound like you've bunched in three year groupings. Correct?
I must not have written that very well. I bunch every other year (odd numbered years). So 2017 is an itemizing year. I have already contributed to my DAF and scheduled the payment for medical insurance premiums for next year. I still have to pay the property taxes that will be due in 2018 (they are billed one year in arrears, so I am liable for them). Plus the state income taxes.

My first year of bunching was 2003. I've never heard a peep from the IRS about it. :beer

pshonore
Posts: 6421
Joined: Sun Jun 28, 2009 2:21 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by pshonore » Sat Nov 25, 2017 4:39 pm

Chip wrote:
Sat Nov 25, 2017 3:31 pm
FIREchief wrote:
Sat Nov 25, 2017 2:13 pm
Sound like you've bunched in three year groupings. Correct?
I must not have written that very well. I bunch every other year (odd numbered years). So 2017 is an itemizing year. I have already contributed to my DAF and scheduled the payment for medical insurance premiums for next year. I still have to pay the property taxes that will be due in 2018 (they are billed one year in arrears, so I am liable for them). Plus the state income taxes.

My first year of bunching was 2003. I've never heard a peep from the IRS about it. :beer
There's no problem in bunching. I get billed for property tax in July and January. So in alternate years I get three payments as a deduction (Jan, July and December) and then one payment in the other year (July). But paying next year's State Income tax on income you have not earned is beyond me. You have no liability for it in 2017. Actually, this may be a moot point very soon.

Chip
Posts: 2202
Joined: Wed Feb 21, 2007 4:57 am

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Chip » Sun Nov 26, 2017 11:25 am

pshonore wrote:
Sat Nov 25, 2017 4:39 pm
But paying next year's State Income tax on income you have not earned is beyond me. You have no liability for it in 2017.
Would you have a problem with someone paying their entire year's state estimated tax for 2018 in March of 2018? Even if they hadn't yet realized the income that would create that tax liability?

Gill
Posts: 4627
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Gill » Sun Nov 26, 2017 11:29 am

Chip wrote:
Sun Nov 26, 2017 11:25 am
pshonore wrote:
Sat Nov 25, 2017 4:39 pm
But paying next year's State Income tax on income you have not earned is beyond me. You have no liability for it in 2017.
Would you have a problem with someone paying their entire year's state estimated tax for 2018 in March of 2018? Even if they hadn't yet realized the income that would create that tax liability?
I'm not the one to whom you addressed the question but, no, that is not shifting income from one year to another whereas prepaying 2018 in 2017 is doing that.
Gill

pshonore
Posts: 6421
Joined: Sun Jun 28, 2009 2:21 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by pshonore » Sun Nov 26, 2017 12:17 pm

Chip wrote:
Sun Nov 26, 2017 11:25 am
pshonore wrote:
Sat Nov 25, 2017 4:39 pm
But paying next year's State Income tax on income you have not earned is beyond me. You have no liability for it in 2017.
Would you have a problem with someone paying their entire year's state estimated tax for 2018 in March of 2018? Even if they hadn't yet realized the income that would create that tax liability?
No - but not sure why anyone would do that. But as I said in a previous thread, why stop with 2018? Why not include 2019 and 2020?

Chip
Posts: 2202
Joined: Wed Feb 21, 2007 4:57 am

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Chip » Sun Nov 26, 2017 1:50 pm

pshonore wrote:
Sun Nov 26, 2017 12:17 pm
But as I said in a previous thread, why stop with 2018? Why not include 2019 and 2020?
I don't have a good faith estimate for those years. But I will have one for 2018 by the end of 2017.

User avatar
Artsdoctor
Posts: 3496
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Artsdoctor » Sun Nov 26, 2017 4:37 pm

paulsalem wrote:
Fri Nov 24, 2017 2:31 pm
We may not exceed (or just barley) the standard deduction next year. We have already exceeded it this year. Is there any reason not to contribute to a donor advised fund this year for our 2018 giving?
I'm just starting to work with TurboTax 2017 and you might try entering some numbers in a tax software program. You can get a rough idea of what those deductions are worth to you.

Not only can you contribute to your DAF for your 2018 giving--but your 2019 giving and beyond. It would all depend on how you view your DAF and what exactly the tax ramifications might be.

User avatar
Artful Dodger
Posts: 431
Joined: Thu Oct 20, 2016 12:56 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Artful Dodger » Sun Nov 26, 2017 8:46 pm

I did thus as well, as I expect my standard deduction to exceed our allowable itemized deductions if tax bill is passed. I'm sending in enough to cover the next 3 to 4 years expected charitable contributions. Will look into prepaying some taxes based on reading this post. I would think I could over pay my 2017 estimated by a bit, then have that credited to 2018 when I file my taxes for 2017.

pshonore
Posts: 6421
Joined: Sun Jun 28, 2009 2:21 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by pshonore » Mon Nov 27, 2017 11:11 am

Artful Dodger wrote:
Sun Nov 26, 2017 8:46 pm
I did thus as well, as I expect my standard deduction to exceed our allowable itemized deductions if tax bill is passed. I'm sending in enough to cover the next 3 to 4 years expected charitable contributions. Will look into prepaying some taxes based on reading this post. I would think I could over pay my 2017 estimated by a bit, then have that credited to 2018 when I file my taxes for 2017.
Overpaying will result in a taxable refund next year which defeats the original purpose. Taking it in cash or applying to next years taxes makes no difference.

User avatar
Artsdoctor
Posts: 3496
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Donor Advised Fund for 2018 Planned Donations?

Post by Artsdoctor » Fri Dec 01, 2017 2:09 pm

paulsalem wrote:
Fri Nov 24, 2017 2:31 pm
We may not exceed (or just barley) the standard deduction next year. We have already exceeded it this year. Is there any reason not to contribute to a donor advised fund this year for our 2018 giving?
Paul,

There has been some new information within the past week that might influence your decision to contribute sooner rather than later if you're going to ultimately contribute anyway.

Many of us here transfer over appreciated shares to our DAFs. If you're using Specific Lot ID for your mutual fund cost basis designation, then it's obvious that you'd want to transfer over those shares with the lowest cost basis to your DAF.

It would be rare to make decisions based on a tax bill which is not yet law, and most would generally discourage that. In fact, here at Bogleheads it's a nonstarter and the rules are pretty strict when it comes to debating legislation.

However, the Senate tax bill that is currently being argued would no longer allow Specific Lot ID as the cost basis method for your mutual fund shares (in your taxable account). The only two ways to calculate cost basis will be average cost method or FIFO.

So without getting into debating a bill which may never come to pass, I would suggest that if you're going to make a contribution anyway, and if you're going to donate appreciated shares, you may as well do it now while the current law allowing Specific Lot ID is still in effect.

paulsalem
Posts: 20
Joined: Mon Feb 06, 2017 12:26 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by paulsalem » Fri Dec 01, 2017 2:47 pm

Artsdoctor wrote:
Fri Dec 01, 2017 2:09 pm
paulsalem wrote:
Fri Nov 24, 2017 2:31 pm
We may not exceed (or just barley) the standard deduction next year. We have already exceeded it this year. Is there any reason not to contribute to a donor advised fund this year for our 2018 giving?
Paul,

There has been some new information within the past week that might influence your decision to contribute sooner rather than later if you're going to ultimately contribute anyway.

Many of us here transfer over appreciated shares to our DAFs. If you're using Specific Lot ID for your mutual fund cost basis designation, then it's obvious that you'd want to transfer over those shares with the lowest cost basis to your DAF.

It would be rare to make decisions based on a tax bill which is not yet law, and most would generally discourage that. In fact, here at Bogleheads it's a nonstarter and the rules are pretty strict when it comes to debating legislation.

However, the Senate tax bill that is currently being argued would no longer allow Specific Lot ID as the cost basis method for your mutual fund shares (in your taxable account). The only two ways to calculate cost basis will be average cost method or FIFO.

So without getting into debating a bill which may never come to pass, I would suggest that if you're going to make a contribution anyway, and if you're going to donate appreciated shares, you may as well do it now while the current law allowing Specific Lot ID is still in effect.
The funds would be in cash and it's for giving we plan on doing in 2018. We don't have any taxable investment accounts yet. Only 401k, IRAs and HSAs.

WorkToLive
Posts: 616
Joined: Thu Nov 12, 2009 2:19 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by WorkToLive » Tue Dec 19, 2017 8:20 pm

I opened and funded ours today with 200 shares of appreciated IBM stock from the 1980s. That should take care of our charitable contributions for many years. I'd been trying to decide what to do with that stock for years and this was so easy.
Took 15 mins tops to set up and fund.

User avatar
FIREchief
Posts: 2684
Joined: Fri Aug 19, 2016 6:40 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by FIREchief » Tue Dec 19, 2017 10:37 pm

WorkToLive wrote:
Tue Dec 19, 2017 8:20 pm
I opened and funded ours today with 200 shares of appreciated IBM stock from the 1980s. That should take care of our charitable contributions for many years. I'd been trying to decide what to do with that stock for years and this was so easy.
Took 15 mins tops to set up and fund.
Which brokerage/DAF?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

WorkToLive
Posts: 616
Joined: Thu Nov 12, 2009 2:19 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by WorkToLive » Wed Dec 20, 2017 6:34 am

I used Vanguard Charitable. It allowed me to fund with my Vanguard Brokerage with a few clicks. I chose total US stock fund at 0.04 ER and VG charges 60 bp to manage. So for 0.64, I get my own charitable fund for as long as I want it.

pshonore
Posts: 6421
Joined: Sun Jun 28, 2009 2:21 pm

Re: Donor Advised Fund for 2018 Planned Donations?

Post by pshonore » Wed Dec 20, 2017 10:11 am

Fido has lowest the lowest donation (5K) to establish the DAF and I think Schwab is the same. Time is wasting, especially if you're moving shares etc from a different broker

Post Reply