There are many places to make tax-deductible charitable donations, but getting one that aligns with your intentions is not as easy. When choosing charities to donate to, make sure that the donor-advised fund or private foundation can give to the charities of your choice. If you use a religious group or some community group, they may not be willing to contribute money to some organizations that operate on different principles. Find out beforehand if your grants are acceptable to them.
In a donor-advised fund (DAF), you suggest where you want the money to go. The board must approve your request, but
City National Bank says DAFs approve about 99 percent of them. Sometimes you may be permitted to use your financial advisor to make grants of your choice.
The Costs Involved
Besides choosing where to put the money, there will be considerable differences in the costs and limitations on how you can give. You will have varying fees and may be required to distribute some of the money annually—5 percent annually in a private foundation. You will also pay excise taxes of up to 2 percent of your annual income from the investment in a private foundation—but none in a DAF.
Tax Write-Off for Donations
There are limits on how much you can deduct charitable donations from your taxes. For instance,
NPTrust says you can only deduct up to 30 percent of your adjusted gross income (AGI) on cash gifts when you donate to private foundations. In contrast, cash gifts given to a donor-advised fund enable you to deduct up to 60 percent of your AGI.
