Investing with Faith / Steve Gaylord

Donor-advised funds build a legacy, reduce income taxes

With the signing of the Tax Cuts and Jobs Act, which went into effect on Jan. 1, 2018, the opportunity to deduct charitable contributions has become somewhat limited for certain individual donors. The new federal law effectively doubled the standard deduction for both single and married joint filers.

Thus, for donors to deduct charitable contributions on their tax returns, their total itemized deductions (which include charitable contributions) must exceed the new standard deduction of $12,000 for single filers or $24,000 for joint filers. This means that most donors might not get a specific tax benefit for giving to charities.

Because of this change in the tax law, many donors may consider establishing a donor-advised fund (DAF) with the archdiocesan Catholic Community Foundation (CCF) to support their giving.

A DAF is a segregated fund maintained and administered by a sponsoring organization. Donor contributions to a DAF are irrevocable, and the sponsoring organization has legal control over the fund. However, the donor receives an immediate tax deduction for their contribution to the DAF and has advisory privileges as to which year the funds are distributed and to which charities. Meanwhile, the assets in the DAF are invested by the sponsoring organization and grow tax-free.

A DAF enables a donor to “bunch” their donations to the fund every few years to surmount the higher standard tax deduction, especially in years when the donor’s income is higher, but direct the sponsoring organization to distribute the funds to charities on a more regular timetable. Donors may also contribute long-term appreciated assets, such as stocks, bonds and real estate, to the DAF and thereby avoid paying capital gains taxes. And a donor may take an immediate income tax deduction for the full fair market value of the appreciated assets, up to 30 percent of the donor’s adjusted gross income.

Donor-advised funds administered by the CCF are very cost-effective and are a great way to grow your legacy of giving to the ministries of the Catholic community in central and southern Indiana, as well as around the world.

Fifty-one percent of available funds from a CCF-administered DAF must be made to any ministry that is part of the Archdiocese of Indianapolis, including its parishes. The remaining 49 percent of available funds may be made to any Catholic organization recognized in The Official Catholic (Kenedy) Directory.

You may contact the archdiocesan Catholic Community Foundation at 800-382-9836, ext. 1482, or ccf@archindy.org to learn more. Or visit its website at www.archindy.org/CCF.
 

(Steve Gaylord is a retired CPA and member of the archdiocesan Catholic Community Foundation Board. Tax information or legal information provided herein is not intended as tax or legal advice and cannot be relied on to avoid statutory penalties. Always check with your legal, tax and financial advisors before implementing any gift plan.) †