The Tax Benefits of Donor Advised Funds and Bunching Charitable Donations

Over the past few years, many high net worth taxpayers have witnessed the unfortunate removal of a substantial amount of itemized deductions from their Schedule A worksheets. Examples include a $10,000 limitation for state and local taxes, no deduction for miscellaneous items such as investment and other professional fees, and a cap on home mortgage interest deductions.

Furthermore, the standard deduction has doubled in the past three years. Under current law, for 2020, the standard deduction that can be subtracted from your taxable income without itemizing is $12,400 for individuals and $24,800 for married couples. This increase may leave individuals with nominal or no mortgage on their primary or secondary residences in a position of not actually itemizing.

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Donor Advised Funds: A Charity Fable

By Sarah Gustafson, CPA, MBT

Billions of dollars will pour into donor advised funds (DAFs) during 2015. Millions of those dollars will flow out to not-for-profits. Could any of that money flow to your organization? How should your organization handle donations from DAFs?

Here’s a tale of an organization – a fictional public charity – that shows how DAFs work from the recipient charity’s perspective.

Doug’s dilemma

Let’s meet Mr. Douglas Fir, the intrepid controller of CascadeKids. Doug is reviewing the month’s revenue records when he spots a check for $10,000.  The check comes from the “Queenie Jones Donor Advised Fund” at NewTown Bank Charitable Fund (NTBCF).

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