Tax-Smart Giving: Donor-Advised Funds

A donor-advised fund (DAF) operates almost like a personal mini-foundation. A DAF is a charitable investment account that you can open through many community foundations or brokerage firms. When you make tax-deductible gifts to your DAF using cash or appreciated investments, you can then choose when and where you want the designated money to be sent.

Whether you take advantage of itemized deductions in a given year (using a bunching strategy) or just want a vehicle through which you can sell appreciated stock(s) now and determine the beneficiary at a later time, your gift to the donor-advised fund provides an immediate tax break to you. You can then make grant requests to St. John the Divine or any IRS-qualified charity, even during years when you’re not actively contributing to the fund. Your tax deduction will come from the donor-advised fund, not St. John the Divine, but your gift can be credited 100% against your pledge.