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Tax Reform: Demystifying the Effects on Charitable Giving

Tax season has arrived! It’s time to dig through that shoebox of donation receipts, review bank statements to make sure you remembered everything, and email nonprofits to track down missing documents. Well, that sounds like fun.

Has your heartburn kicked in yet? This year, reach for the antacids. But next year, a Donor Advised Fund (DAF) might solve your problem. DAFs can reduce the stress of tax season and make donors’ philanthropy simple and effective all year long.

The gift of time

For a DAF, donors’ only tax-deductible gifts are their donations into their funds, regardless of how many charities they make grants to support.

When a donor gives to their DAF, they receive a tax receipt for the entire amount of the gift. Every time the donor requests a grant, his/her selected charity receives a payment. And while most charities reply with a lovely thank you note, that note isn’t a tax receipt so the donor can enjoy it without thinking about taxes.

In other words, the messy shoebox transforms into a single tax letter, and there’s nothing to organize before April 15. No bank statements to review, no calls to make. Use your extra time for something that fulfills you—and keeps the heartburn at bay.

More bang for your buck

With a DAF, you can increase your philanthropic impact because your dollars aren’t redirected to taxes and credit card fees. Donors avoid capital gains taxes by transferring appreciated assets or property into their funds. Many DAF providers (including The Columbus Foundation) can accept more complex assets as well, including mutual funds, business interests, and more.

Because The Columbus Foundation doesn’t charge fees each time a grant is requested, our donors enjoy the benefits of managing their giving online while avoiding the 2-5% transaction fees that most charities charge for credit card gifts. Bottom line: your DAF can maximize your impact while minimizing your stress.

Bundling your giving

When the 2017 tax law increased the standard deduction for personal income tax, many donors discovered that it no longer made sense to itemize their deductions. Since then, more and more donors have taken advantage of bundling their giving to gain maximum tax benefit.

Under a bundling strategy, a donor makes a large charitable gift to their fund one year, and itemizes their deductions accordingly. In subsequent years, they request grants from their DAF to continue supporting their favorite charities, while taking the standard deduction and not worrying about charitable tax receipts.

This method allows donors to make decisions about how they support charities based on their interests, values, and passions – not based on when it makes sense from a tax perspective. This strategy also allows donors to support their favorite charities consistently year after year, which can contribute to a healthier and more stable nonprofit sector.

Thoughtful philanthropy

For donors at The Columbus Foundation, a DAF provides tools to make their giving more intentional. Our team of community experts can provide insight on the effectiveness of an organization, and at the donor’s request, can introduce donors to new nonprofits that quietly do fantastic work.

Additionally, The Columbus Foundation’s online Giving Store lets donors review the grants they’ve made over time. For some donors, seeing their grant history reveals that their actions and their intentions don’t align. Reviewing your history might reveal, for example, that you believe your top priority is education, but 70 percent of your grants support social services. Seeing your grant history spurs conversation that allows you to either redefine your priorities, or change your actions to accomplish your goals.

Your philanthropy helps charities to do great things, and tax season doesn’t have to steal the sparkle from your experience. A DAF can keep your generosity flowing while simplifying your taxes (and minimizing your acid reflux).

If you’re interested in exploring whether a DAF makes sense for you, contact us at The Columbus Foundation.

About The Columbus Foundation

The Columbus Foundation serves nearly 3,000 individuals, families, and businesses that have created unique funds and planned gifts to make a difference in the lives of others through the most effective philanthropy possible. The Columbus Foundation is Your Trusted Philanthropic Advisor® and is one of the top ten largest community foundations in the country.

Oct 25, 2018



Brad Britton, JD, LLM, is the Director of Planned Giving and General Counsel at The Columbus Foundation.