Donor-Advised Funds for Business Owners

# A Smarter Way for Small Business Owners to Handle Charitable Giving # If you’re a business owner, your income probably doesn’t look the same every year. Some years are steady - Some years spike - Some years include: - A large contract - A bonus distribution - Sale of equipment or property - Sale of the business - Exercised stock options Then December rolls around, and you write a few checks to charity. That’s generous but often not strategic. If you’re already giving, it’s worth exploring charitable giving strategies for small business owners that help your donations work harder from a tax standpoint. One of the most effective tools we discuss with clients is a Donor-Advised Fund tax strategy. ## What Is a Donor-Advised Fund (In Plain English)? ## Here’s the simple version: 1 - You contribute money or appreciated assets into a Donor-Advised Fund 2 - You receive the tax deduction immediately 3 - You distribute money to charities over time The key advantage: You control when you take the deduction even if charities receive funds later. For business owners managing fluctuating business income, that flexibility can make a big difference. ## When a Donor-Advised Fund Makes Sense ## We often discuss this strategy during high income year tax planning, especially when you have: * A record profit year * Sold a business or major asset * Significant K-1 income * Large capital gains * Exercised stock options * Income pushing them into a higher tax bracket Instead of donating the same amount annually, you can use bunching charitable contributions—front-loading donations into a high-income year to maximize deductions when they matter most. Let’s say you normally donate $15,000 per year. Instead of giving $15,000 each year for three years, you could: * Contribute $45,000 to a Donor-Advised Fund in one high-income year * Take the full deduction immediately * Potentially reduce income in a higher bracket * Distribute $15,000 per year to charities over time Your charitable impact stays the same. But your tax efficiency improves. That’s how you strategically reduce taxes with charitable giving. ## The Overlooked Strategy: Donating Appreciated Stock ## Many business owners don’t realize the advantages of donating appreciated stock tax benefits. Most people: * Sell stock * Pay capital gains tax * Donate what’s left A more efficient approach: * Donate appreciated stock directly to a Donor-Advised Fund * Deduct the full fair market value * Eliminate capital gains tax * Allow the charity to receive the full value For our clients with appreciated investments, this often produces significantly better outcomes. ## Simplifying Your Tax Paperwork ## Another benefit of donor-advised fund benefits is organization. Instead of tracking multiple receipts from multiple charities, you receive one consolidated tax document. That means: * Cleaner records * Easier substantiation * Less administrative noise For busy business owners, simplicity matters. ## Is This Strategy Right for You? ## A donor-advised fund tax strategy may be worth exploring if you: * Consistently give to charity * Have appreciated investments * Experience fluctuating income * Expect a future liquidity event * Want better control over timing deductions This isn’t about giving more. It’s about giving smarter. ## The Bottom Line ## You already work hard to manage expenses and your charitable giving deserves the same level of planning. If you expect income to increase this year this conversation is worth having well before year-end. Strategic decisions made early almost always lead to better outcomes than last-minute December planning.

Donor-Advised Fund Tax Strategy for Small Business Owners

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