Giving to Charity? DAF vs Appreciated Stock Explained

Many people focus on the amount they give to charity, but how they give is also an important consideration. The strategy you choose can impact both your taxes and how much of your donation actually reaches the cause.

For example, donating cash might be simple, but depending on your circumstances, it’s generally one of the least tax efficient options.

If you instead donate appreciated stock you’ve held long term, you can potentially receive a deduction for the full market value and avoid capital gains tax on the appreciation entirely.

And then there are donor advised funds or DAFs, which allow you to contribute assets, recommend grants to charities over time, and provide a tax deduction in the year that eligible contributions are made, subject to applicable rules and individual circumstances.

That can be especially useful in high income years or if you want a bunch deductions in a single tax year while spreading out your charitable giving over time.

Each approach has trade-offs from flexibility to simplicity to tax efficiency, but without a coordinated approach, the timing and structure of charitable giving may not be aligned with your broader tax saving and financial planning considerations.

At Blue Chip Partners, we can help align your charitable giving with your broader financial planning needs and goals.