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Tax Reduction Strategies that Help Our Neighbors

Posted on December 16, 2019 by

We sat down with Chester County Food Bank Board member, Kevin McDermott, Private Wealth Advisor of Delphi Wealth Management Group to discuss two tax strategies for legacy giving.

DONOR ADVISED FUND (DAF)

“A popular philanthropic vehicle, a Donor Advised Fund can be set up to benefit the Chester County Food Bank. A DAF is a simple, tax efficient investment account. It allows donors to make a charitable contribution, receive an immediate tax deduction, and recommend grants from the fund over time to charities,” says Kevin McDermott,

Here’s how a DAF works:

  • Make a contribution from personal assets, including cash, stock, real estate etc.
  • Immediately, receive the maximum tax deduction allowed by the IRS.
  • Name the DAF Account, designate the advisors and name the Chester County Food Bank as beneficiary.
  • Your contribution is placed in the DAF investment account, which grows, tax-free.
  • At any time, you can recommend grants from the fund to Chester County Food Bank or any other charity.

“New tax laws have changed the nature of donations,” said McDermott. “Now charitable contributions may not be deductible if someone chooses to file their taxes using the new higher standard deduction instead of itemizing. The DAF allows an individual to lump several years of charitable contributions together to make itemizing their deductions worthwhile even though they can spread those contributions out over a number of years.”

QUALIFIED CHARITABLE DISTRIBUTION / QCD

McDermott said, “Another option for tax-free giving is available to retired folks who designate the Chester County Food Bank as the recipient of the Required Minimum Distribution (RMD) from retirement accounts or IRAs each year. As you may remember, when you reach the age of 70 1/2, the IRS requires a withdrawal of a portion of your retirement account each year, whether or not you need it for living expenses. The RMD is considered taxable income. To avoid reporting the RMD as taxable income, a wise and generous idea is to designate these withdrawals (or a portion of them) directly to the CCFB. The amount becomes a Qualified Charitable Distribution, a mutually rewarding strategy for giving.

To find the right provisions for your tax situation, please contact your financial representative or tax attorney.

To support the Chester County Food Bank, visit our website or call 610-873-6000 to speak with Beverly Abbonizio, Director of Development. 

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