Monterey, CA Tax Laws Changing For Donations Made To 501(c)3 Non-Profits.

View From A Non-Profit Serving Carmel, Carmel Valley, Carmel-by-the-Sea, Gonzalez, Greenfield, King City, Marina, Monterey, Pacific Grove, Pebble Beach, Salinas, Seaside And Soledad California

The government is looking to increase taxes by getting rid of a long-time rule that allows donors to commit to giving to one or more 501(c)3's in the current year, and then give the funds to a non-profit corporation in later years.  The system works like this.  First, the person sets up an account which is similar to a private foundation but without all of the expenses foundations have to absorb.  What is called a donor-advised fund is an individual account which is held under the umbrella of a larger tax-exempt organization.  Second, the person can then open the account with as little as $5,000.  Third, the person can then direct the funds later in increments as low as $50 towards charities of their choice.  The owner of the account typically pays an administrative fee of up to 0.7% of the assets.  There are about 2,300 sponsorship groups across the country with $40 billion in them.  If you are interested in looking opening one of these before the tax code is changed, major investment companies like Fidelity Investments, Charles Schwab and Vanguard all have charitable asset arms that can open this type of an account for you.  One thing that is appealing about these vehicles is that if you have stock that has appreciated, you can put it into the donor-advised account, sell it, and then take a deduction for the current value as a charitable donation without having to recognize the capital gain on the asset.  This sounds like a great idea to me.  If you are interested, consider opening an account by the end of the year.  This type of tax break is unlikely to be around for long, but tax advisors don't expect it to be phased out until at least next year.