What is the difference between Donor Advised Funds and private foundations?
Starting a private foundation can involve substantial start-up costs and administrative expenses, such as the yearly filing of a Form 990-PF. But one of the most important differences is that under current law, Donor Advised Funds receive more favorable tax treatment than a private foundation. Donor Advised Funds allow donors to take a federal income tax deduction up to 50% of adjusted gross income (AGI) for cash contributions, and up to 30% of adjusted gross income (AGI) for appreciated securities, versus 30% of AGI for cash contributions and 20% of AGI for appreciated securities for a private foundation. Donor Advised Funds also offer the ability to recommend grants anonymously, if desired. It is also easy to convert a foundation to a Donor Advised Fund to simplify ongoing maintenance and record keeping.
Starting a private foundation can involve substantial start up costs and administrative expanses, such as the yearly filling of a Form 990-PF. But one of the most important differences is that Donor Advised Funds receive more favorable tax treatment than a private foundation. Donor Advised Funds allow donors to take a federal income tax deduction up to 50% of adjusted gross income (AGI) for cash contributions and up to 30% of adjusted gross income (AGI) for appreciated securities; versus 30% of AGI for cash contributions and 20% of AGI for appreciated securities for a private foundation. Donor Advised Funds also offer the ability to recommend grants anonymously, if desired. It is also possible to convert a foundation over to a donor advised fund to simplify on going maintenance and record keeping.
