The Missing Tax Benefit of Donor-Advised Funds

13 Pages Posted: 19 Mar 2016

See all articles by John R. Brooks

John R. Brooks

Georgetown University Law Center

Date Written: February 29, 2016

Abstract

Donor-advised funds are often billed, by both their critics and advocates, as providing a preferred from of charitable donation relative to typical giving. This is because the tax law allows for a full deduction of the money or property contributed to the fund in the year of the contribution, even if the money does not go to operating charities until a future year.

In this report, I show that this feature of donor-advised funds does not actually provide an additional benefit over typical gifts of property to charities, and in many cases creates a tax cost. Furthermore, in some situations that do provide a modest tax benefit, most or all of that benefit is soaked up in fees by the donor-advised fund sponsoring organizations, such as Fidelity, Schwab, and Vanguard. Thus, donors need to better understand the potential costs and benefits of donor-advised funds.

JEL Classification: K34

Suggested Citation

Brooks, John R., The Missing Tax Benefit of Donor-Advised Funds (February 29, 2016). Tax Notes, Vol. 150, No. 9, 2016. Available at SSRN: https://ssrn.com/abstract=2749137

John R. Brooks (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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