Laura Hill

Feb 26 2018

How to Navigate the New Tax Code Using Non-Endowed Donor Advised Gift Funds

The Tax Cuts and Jobs Act (the “Act”) has left many taxpayers rethinking their tax planning strategies. The increased standard deduction and reduced availability of itemized deductions may prevent taxpayers who have itemized in the past from doing so in the future. The changes have led many to fear that their yearly charitable giving would not net them any extra tax benefits over the new standard deduction. However, there is good news for taxpayers who still want to donate to their favorite charitable organizations and maintain an important tax benefit.

Learn more about inflation and retirement planning:

Charitable Contributions Still Remain Tax Deductible

Although it may be harder to claim, the itemized deduction for charitable contributions still exists in the Act. In fact, Congress actually increased the adjusted gross income (“AGI”) threshold for the deductibility of charitable cash contributions from 50% to 60%.

Donor Advised Gift Funds Provide Potential Tax Benefits

Hills Bank Trust and Wealth Management offers a low-cost and local solution that can simplify the charitable giving process for taxpayers. The Hills Bank Non-Endowed Donor Advised Gift Fund (“DAGF”) was established in 1997 for donors who desire to make important gifts to 501(c)(3) charitable organizations that are public charities under Section 509(a).

 “Bunch” Charitable Giving for Tax Benefits

The Non-Endowed Donor Advised Gift Fund allows individuals to “bunch” charitable giving in a single year in order to itemize their tax deductions for the “bunch year.” Below are two examples – the first example is without the DAGF and the second example utilizes the DAGF:

Example 1: No DAGF

Example 2: DAGF

Year 1: Taxpayer donates
$3,000 directly to charities.
Year 1: Taxpayer funds the DAGF with $14,000 and distributes $3,000 to charities from the DAGF.
Year 2: Taxpayer donates
$5,000 directly to charities.
Year 2: Taxpayer distributes $5,000 to charities from the DAGF.
Year 3: Taxpayer donates
$6,000 directly to charities.
Year 3: Taxpayer distributes $6,000 to charities from the DAGF.

Example 2 demonstrates how “bunching” allows taxpayers to make multiple years’ worth of donations to the DAGF in a single tax year. In Example 2, the taxpayer contributes three years’ worth of donations to the DAGF during Year 1. The aggregated contribution makes it substantially easier for the taxpayer to exceed the standard deduction threshold and receive a tax benefit for their “bunch year,” while simultaneously allowing the taxpayer to distribute the funds to charities of their choice over several years.

Talk to Your Tax Preparer Today

An initial donation of $10,000 in cash or marketable securities will open an account within the Hills Bank Non-Endowed Donor Advised Gift Fund. All contributions to the DAGF are irrevocable and non-refundable. Therefore, please discuss your long-term charitable giving plans with your legal and accounting advisors and then contact Hills Bank Trust and Wealth Management at 1-800-899-8858 or for more information.

Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.
Laura Hill

About Laura Hill

Laura Hill is a Trust and Wealth Management Officer at Hills Bank’s North Liberty location on Forevergreen Road. Laura has been at Hills Bank since January of 2017 specializing in trust and estate administration, estate planning, charitable trusts and donor advised gift funds. Laura earned her undergraduate degree at Iowa State University and continued her education at Creighton University School of Law. Prior to joining the bank, she practiced law in Buchanan County, Iowa. Laura can be reached at 1-800-899-8858.

This entry was posted in News and Events and tagged , , , , . Bookmark the permalink.