Tax-Savvy Giving with Donor Advised Funds
At Brooklyn Community Foundation, we are proud to work in partnership with a generous community of fund holders to help them maximize their giving to the causes they care about in Brooklyn and beyond. In 2021 alone, our donor advisors gave $8.2 million from their funds — and we’ve seen that generosity continue throughout this year, even as the nation enters a period of economic uncertainty.
Bear markets may herald economic challenges, but that doesn’t mean your charitable giving commitments have to be put on hold. If you’re like many donors, you’re still looking for ways to champion the causes and organizations you care about despite uncertainty in the financial market. Our donor services team is here to support you as you map out your year-end giving, to determine the most powerful, tax-efficient ways to maximize your impact. Read on for some of the tax considerations to take into account as you plan your giving.
Donations of Appreciated Stock
It’s important to recognize that although the market has fallen, not every stock is down — and it’s still incredibly tax-efficient to donate highly-appreciated stock to your Donor Advised Fund. When you give appreciated stock held for more than one year (a long-term capital asset) to your Donor Advised Fund, instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your overall income tax situation.
Qualified Charitable Distribution for Older Adults
Don’t forget about the Qualified Charitable Distribution (QCD), either. If you’ve reached the age of 70.5, the QCD is an elegant and effective planning tool. You are still required to take Required Minimum Distributions (RMDs) from your IRA even in a down market, and the QCD can help offset this tax hit by allowing you to direct up to $100,000 to a qualified public charity — for example, if you would like to support a variety of needs across Brooklyn, you might consider supporting our Community Fund to take advantage of this allowance.
Planning for the Future
As we approach year-end, this is also a good time to confirm that your estate plan is in good shape, including any bequests you may wish to leave to your Donor Advised Fund so that the causes you care about can continue to be supported for generations to come. A bequest by way of a qualified retirement plan beneficiary designation is an especially effective tool to support your charitable intentions into the future, as capital flowing directly to your fund at the Foundation from a retirement plan after your passing will not be subject to either income tax or estate tax.