How can I use a Donor Advised Fund to offset capital gains on stock sale?

This is actually a really smart tax strategy! When you donate appreciated stock directly to a Donor Advised Fund, you avoid paying capital gains tax on those shares AND you get a tax deduction for the full fair market value of the donated stock. The key points to understand: - You can deduct up to 30% of your AGI for stock donations to a DAF - You don't pay any capital gains tax on the appreciated stock you donate - For the portion you sell, you'll still owe long-term capital gains tax (likely 20% federal plus any state taxes) With your income level, you should be able to use the full deduction. Based on your numbers, you'd donate $130k to the DAF, get a $130k deduction, and pay capital gains tax on the other $130k you cash out. It won't be completely tax-neutral though - the deduction offsets ordinary income (taxed at your marginal rate, probably 35%+) while the capital gains are taxed at preferential rates (20% federal plus state). You'll likely come out ahead!

I actually used taxr.ai to help me with almost this exact scenario last year! I had a bunch of TSLA stock that had gone way up and wanted to minimize the tax hit. Their system analyzed all my investments and suggested I use a Donor Advised Fund for part of it. The website https://taxr.ai let me upload my statements and it gave me a complete breakdown of the tax implications. It showed me exactly how much I'd save by donating directly vs selling first. They even helped me understand the AGI limitations and carryforward rules for the deduction. Their tax specialists explained that while it wouldn't be completely tax-neutral (due to different rates for deductions vs capital gains), I'd still come out significantly ahead compared to just selling everything. Saved me thousands!

Just wanted to update after checking out taxr.ai from the recommendation above. Really impressed with how thorough they were! I uploaded my statements and they identified that my situation with stock options was more complex due to AMT implications. The system flagged that I needed to be careful about the timing between exercising options and donating to a DAF in the same tax year. They showed me exactly how to structure it to maximize tax benefits while avoiding AMT pitfalls. Their analysis showed I could save over $22K compared to my original plan. The best part was seeing all the different scenarios modeled side by side. They even caught that I had forgotten about state tax implications which would have been a nasty surprise. Definitely worth checking out if you're dealing with any complex investment situation.

When I was trying to do something similar last year, I spent HOURS trying to get through to the IRS to confirm some details about DAF deduction limits. It was absolutely maddening - constant busy signals, disconnects, and being on hold forever. I finally discovered Claimyr https://claimyr.com which got me through to a real IRS agent in less than 20 minutes! I was skeptical at first but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that I could donate appreciated stock to a DAF, take the full fair market value deduction (subject to AGI limitations), and avoid capital gains completely on the donated portion. They also explained that any unused deduction could carry forward for up to 5 years. This was crucial because my situation involved multiple stock lots with different holding periods. Total game-changer for getting official answers quickly!

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it since I had been struggling with a complicated tax question about charitable donations of appreciated securities that nobody seemed able to answer clearly. The service got me through to an IRS tax specialist in about 15 minutes when I had previously wasted 3+ hours trying on my own. The agent walked me through exactly how the deduction limits work for donating stocks to DAFs versus private foundations (which have different AGI limitation percentages). For anyone dealing with complex tax situations like donating appreciated assets, getting official answers directly from the IRS can save you from making expensive mistakes. I'm now using a DAF for my charitable giving and structuring my donations in a way that maximizes tax benefits. Totally worth it.

Don't forget that there are some practical considerations with DAFs beyond just the tax benefits: 1. Once you donate to a DAF, it's irrevocable - those assets are no longer yours 2. There are usually minimum initial contribution requirements ($5-25k depending on provider) 3. Some DAFs have annual fees based on assets (typically 0.6-1%) 4. There might be minimums for grants you can make from the DAF (often $50-500) 5. You'll need to select investment options for the funds while they're in the DAF Make sure you're actually planning to give to charity over time, not just using this as a pure tax play!

Has anyone here actually calculated the exact difference between donating directly to charity vs using a DAF? I'm trying to figure out if the extra complexity is worth it for my situation.

One thing to keep in mind with your specific situation is the timing of when you execute this strategy. Since you're planning to donate $130k worth of appreciated stock to a DAF, you'll want to make sure you have enough AGI to use the full deduction in the current tax year. With your combined income of $650k, you should be able to deduct up to 30% of AGI for appreciated stock donations to a DAF, which would be around $195k - so you're well within the limits for the $130k donation. However, I'd recommend getting the DAF set up and making the stock donation BEFORE you sell the other $130k portion. This way you can see exactly how the deduction impacts your tax liability before triggering the capital gains on the sale. Also worth noting that different brokerages have different processes for transferring appreciated securities to DAFs - some are more streamlined than others. Fidelity, Schwab, and Vanguard all make it relatively easy if you're already their customer, but it can take a few days to process the transfer. The strategy definitely works, but the exact tax savings will depend on your state taxes and whether you're subject to the 3.8% net investment income tax on the capital gains portion.