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Weekly Market Commentary


5 Tax Advantages of Donor Advised Funds

A donor-advised fund (DAF) is a charitable giving vehicle created to manage charitable donations over many years on behalf of families or individuals. The benefits of DAFs extend beyond their primary purpose of facilitating philanthropic activities. One of the main incentives of DAFs is the tax benefits donors receive from giving. Donors can bolster their philanthropic impact by understanding and leveraging these tax advantages:

1. Immediate Charitable Tax Deductions - One tax benefit of DAFs is the immediate charitable tax deduction. When a contribution is made to a DAF, the donor receives an immediate tax deduction in that tax year. The donor can immediately benefit from the tax deduction before the funds are eventually granted to specific charities.

The tax deductions apply to multiple contributions: cash, privately held stock, real estate, and other appreciated assets. However, the IRS limits the deductible amount based on the donor's adjusted gross income (AGI) for tax purposes. Typically, the deductions can be up to 60% of AGI for cash contributions and up to 30% of AGI for appreciated securities.

2. Tax-Free Growth - Donations in a donor-advised fund grow tax-free, which may incentivize donors to continue giving and increasing their contributions. The investments made within the DAF continue to appreciate without incurring capital gains taxes. Over time, appreciation may lead to a larger pool of funds available for charitable giving, magnifying the donor's philanthropic impact.

3. Avoidance of Capital Gains Tax - Contributions of appreciated assets such as stocks, real estate, or other investment assets not only qualify for a tax deduction but also enable the donor to avoid capital gains tax. Donors can avoid the capital gains tax that would typically be owed upon sale by transferring these assets directly into a DAF rather than selling them and donating the proceeds. It is important to note that donors must not liquidate securities before granting but donate the securities directly to the DAF, or capital gains tax will be due.

4. Estate and Inheritance Tax Benefits - DAFs may provide benefits in terms of estate planning. Contributions to a DAF are removed from the donor's estate, potentially reducing the estate tax liability. If the DAF is a beneficiary, the assets may not be subject to probate. Donors must work with their financial, legal, and tax professionals to fully understand how donating DAFs as part of their estate plan may impact their situation.

5. Simplified Record Keeping - From a tax compliance perspective, DAFs may provide a more simplified means of record-keeping for donations. The DAF sponsor provides donors with all the documentation needed for tax reporting, eliminating the need to track multiple receipts from various charitable organizations.

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In conclusion, DAFs present a wide range of tax benefits to donors while helping to facilitate their philanthropic intentions. These five tax benefits make DAFs an attractive vehicle for charitable giving and wealth management. Nevertheless, donors should consult with our office and tax professionals to fully understand how to leverage the potential benefits of DAFs.
The major averages each notched their third straight positive week. The S&P 500 added 2.31%, while the Nasdaq jumped 2.42%. The Dow closed the week with a 2.06% advance. This is the first three-week win streak for the Dow and S&P 500 since July and the first since June for the Nasdaq. Market performance improved as market capitalization decreased over the last week, with Mid-Cap stocks rising +3.72% and Small Caps increasing +5.49%. Both Developed International and Emerging Markets outperformed domestic stocks on the week increasing +4.50% and 2.99% respectively. The 10-year Treasury yield ended the week at 4.43%, down from 4.63% a week prior (bond prices move inversely with yields). As a result, the Bloomberg Agg bond index returned 1.37%

Business is Booming: Vegas was deemed the wedding capital of the world in 1953, and business has stayed brisk in the ensuing 70 years. Originally advantageous for the state’s laissez-faire attitude toward things like blood tests and waiting periods and a municipal penchant for speed, the industry remains robust, and the wedding industry alone was responsible for $2.5 billion of the $80 billion Vegas hit in tourist spending in 2022, with some 100 chapels and 18,000 workers in the Clark County wedding business alone. The Clark County Marriage License Bureau averages 219 licenses a day to couples and is open from 8 a.m. to midnight.

Cheap Food and Big Profits: Nissin Foods, which has a 40 percent market share in the instant ramen segment in the U.S., will spend $228 million to expand in the United States, buying up a 640,000-square-foot facility in South Carolina to add on to its production centers in California and Pennsylvania. Ramen continues to grow in the U.S., and Nissin has logged double-digit growth for all of the past four quarters, reaching a 27 percent increase in sales year over year in the first quarter of 2023.

Thanksgiving Spending: Food prices aren’t rising at the same rapid clip as last year. Consumers are estimated to spend about 2% more on Thanksgiving dinner this year, compared with a 14% increase last year, according to market research firm Circana. Turkey and eggs are much cheaper than a year ago, while some baking ingredients, such as sugar, are a bit pricier. Many of the factors that sent food inflation soaring since 2022 have abated. Commodity prices for staples such as wheat, corn, and some cooking oils that soared after Russia’s invasion of Ukraine at the start of 2022 have declined.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Osaic Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Osaic Wealth, Inc. or its affiliates.

Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.

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