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The Tax Advantages of Donor-Advised Funds

Giving with a donor-advised fund can be a tax efficient way to conduct your philanthropy. Below are a few strategies to increase your charitable impact using a donor-advised fund while receiving tax benefits.

 

Grow Your Charitable Funds Tax-Free.
The money in your donor-advised fund (DAF) can be invested before it is granted out. With market growth and investment income, your DAF balance can also grow. This makes even more money available for grantmaking. Moreover, while you take tax relief for the gifts you make to your DAF, you will not be taxed on any growth, since the assets belong to the DAF’s charitable sponsor.

 


 

Reduce Tax Burden by Contributing Appreciated Assets.
You can take tax relief when you make a charitable contribution to your DAF, reducing your tax liability. Among the most tax-efficient ways to do this is to donate publicly traded securities or restricted shares to your DAF. These contributions exempt you from paying capital gains tax on the shares’ appreciation. This strategy may be especially advantageous in a windfall year to offset your income. You may also donate illiquid assets such as property, alternative investments, privately held shares, interests in a closely held business, art, and other personal property. 

Below is a calculator to help you determine the tax relief for which you may be eligible by contributing appreciated assets to an NPT UK DAF. 

Shares Calculator*

Please Note: the Shares Calculator assumes a 20% CGT.

 


 

Make a Gift Aid Declaration.
Gift Aid is the name of the tax incentive for cash donations. Gift Aid is a split tax incentive between the donor and the charity. A cash contribution to an NPT UK donor-advised fund is eligible for Gift Aid. If you have completed a Gift Aid declaration form, NPT UK will claim Gift Aid on your cash contribution and credit your donor-advised fund account for the amount of the reclaimed Gift Aid. Currently, for every £1 contributed, NPT UK can claim an extra 25 pence in Gift Aid. For more information, contact us.

 

Below is a calculator to help you determine the Gift Aid for which you may be eligible with a contribution to your NPT UK DAF.

Gift Aid Calculator

 


 

Claim UK Tax Relief.
If a donor pays over the basic rate of tax, they are eligible to claim the difference between their tax rate and the basic tax rate on the gross donation when completing their Self-Assessment tax return.

 

 

Please Note: the information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. NPT UK does not provide legal or tax advice. NPT UK strongly encourages you to consult with your tax and/or legal advisors before making any charitable contributions.

Learn about how a DAF works—and how it can work for you.

If you pay taxes in the UK and US, giving with a dual-qualified charity like NPT Transatlantic can be a tax-efficient way to conduct your philanthropy.

 

NPT Transatlantic is a UK/US dual qualified charity. Donations to NPT Transatlantic are recognised for tax purposes in both countries simultaneously. NPT Transatlantic is an independent UK charity (charity number 1153376) and is recognised by the IRS as a disregarded entity of the 501(c)(3) public charity National Philanthropic Trust in the US (EIN 23-7825575).  NPT Transatlantic offers donor-advised funds for donors who wish to manage their giving over time and designated funds for donors who wish to make single gifts.

 


 

Grow Your Charitable Funds Tax-Free.
The money in your donor-advised fund (DAF) can be invested before it is granted out. With market growth and investment income, your DAF balance can also grow. This makes even more money available for grantmaking. Moreover, while you take tax relief for the gifts you make to your DAF, you will not be taxed on any growth, since the assets belong to the DAF’s charitable sponsor.

 



Reduce Tax Burden by Contributing Appreciated Assets.
You can take tax relief when you make a charitable contribution to your DAF, reducing your tax liability. Among the most tax-efficient ways to do this is to donate publicly traded securities or restricted shares to your DAF. These contributions exempt you from paying capital gains tax on the shares’ appreciation. This strategy may be especially advantageous in a windfall year to offset your income. You may also donate illiquid assets such as property, alternative investments, privately held shares, interests in a closely held business, art, and other personal property.

 

 



Claim UK Tax Relief.
If a donor pays over the basic rate of tax, they are eligible to claim the difference between their tax rate and the basic tax rate on the gross donation when completing their Self-Assessment tax return.

 



Make a Gift Aid Declaration.
Gift Aid is the name of the tax incentive for cash donations. Gift Aid is a split tax incentive between the donor and the charity. A cash contribution to an NPT UK donor-advised fund is eligible for Gift Aid. If you have completed a Gift Aid declaration form, NPT UK will claim Gift Aid on your cash contribution and credit your donor-advised fund account for the amount of the reclaimed Gift Aid. Currently, for every £1 contributed, NPT UK can claim an extra 25 pence in Gift Aid. For more information, contact us.

 

Below is a calculator to help you determine the Gift Aid for which you may be eligible with a contribution to your NPT Transatlantic DAF.

Gift Aid Calculator

 



Receive a US Tax Deduction.
Donors are eligible for an itemised income tax deduction in the US on the date that they irrevocably donate assets to NPT Transatlantic. Any deduction will depend on the type of asset contributed and the donor’s personal financial circumstances.

 

 

Please Note: The information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. NPT Transatlantic does not provide legal or tax advice. NPT Transatlantic strongly encourages you to consult with your tax and/or legal advisors before making any charitable contributions.

Learn about how a DAF works—and how it can work for you.