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Is there a best time of year to donate appreciated shares to DAF?

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  • Is there a best time of year to donate appreciated shares to DAF?

    I last funded my DAF in January 2020 with two years worth of donations. I was planning on donating again in January 2022 but am now wondering if perhaps I should wait until the end of 2022 for added potential growth. Obviously the market could also have a down year and then these shares would be worth less.

    Am I overthinking it? Curious to hear how everyone approaches this.

  • #2
    You're overthinking it.

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    • #3
      At it's peak

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      • #4
        We usually help planning clients figure this out in Nov/early Dec when we can run a decent tax projection and determine shares with most LTCG to recommend donating. Also, if you’re donating a significant amount of appreciated stock/funds, can also calculate 30% of MAGI to tweak the total donation. I think that would be my ideal time.

        Note to all - you can get a deduction for cash donations of up to 100% AGI this year (only). Donating cash and then investing for long-term growth in your DAF has the same impact as donating appreciated stock.

        Another thought - this c/b a great time for a Roth conversion (only 18 days left, bg tomorrow) that is partially or all offset with a DAF.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Originally posted by jfoxcpacfp View Post

          Another thought - this c/b a great time for a Roth conversion (only 18 days left, bg tomorrow) that is partially or all offset with a DAF.
          Senate has not passed this bill, has it?

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          • #6
            Originally posted by jfoxcpacfp View Post
            We usually help planning clients figure this out in Nov/early Dec when we can run a decent tax projection and determine shares with most LTCG to recommend donating. Also, if you’re donating a significant amount of appreciated stock/funds, can also calculate 30% of MAGI to tweak the total donation. I think that would be my ideal time.

            Note to all - you can get a deduction for cash donations of up to 100% AGI this year (only). Donating cash and then investing for long-term growth in your DAF has the same impact as donating appreciated stock.

            Another thought - this c/b a great time for a Roth conversion (only 18 days left, bg tomorrow) that is partially or all offset with a DAF.
            That's helpful, thanks! I wasn't aware of the 30% rule, good to know. We would be donating a far less % of our annual MAGI and the donation wouldn't drop us from the highest federal tax bracket so in our situation, I don't think it would make sense to do a Roth conversion.

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            • #7
              I do it at the end of the year when I have a good idea of what my AGI will be. The IRS limits donations of appreciated shares to 30% of AGI, although if you go over, the excess can be carried forward.

              Another advantage, as you mentioned, is that more often than not, your shares will be worth more at the end of the year as compared to the beginning.

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              • #8
                Originally posted by StarTrekDoc View Post
                At it's peak
                This is correct, but impossible.

                If you believe that timing the market is not as important as time in the market, then you would want your money to be growing for as long as possible (so you can make more donations). The way to do that would be to donate at the last possible moment, which would be as close to 12/31 of each year as you can.

                That way you will get more time in the market, which in the long run would be expected to give you more money to move into the DAF.

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                • #9
                  By no means am I a timing market person and completely support in-market concept. If you're sitting on the sidelines, it's not working for you. DAF remains in-market and you can manage (AUM free for the future charity) it still.

                  The donation grows no matter what, even in DAF; it's just how much deduction that happens. It CAN be Jan 2 or July 5 or Dec 31st. That's when you THINK the top is reached, that's the optimal time to move to DAF - even if one hits 30%; there's carry forward. So say one has TLSA and 3rd qtr news just posted and spiked stock to 1200. There wouldn't be another news spike for the remainder of the year to drive up the price typically for TLSA - so in theory the best time to move over to DAF would be shortly thereafter, not Dec 13th.

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                  • #10
                    Originally posted by StarTrekDoc View Post
                    By no means am I a timing market person and completely support in-market concept. If you're sitting on the sidelines, it's not working for you. DAF remains in-market and you can manage (AUM free for the future charity) it still.

                    The donation grows no matter what, even in DAF; it's just how much deduction that happens. It CAN be Jan 2 or July 5 or Dec 31st. That's when you THINK the top is reached, that's the optimal time to move to DAF - even if one hits 30%; there's carry forward. So say one has TLSA and 3rd qtr news just posted and spiked stock to 1200. There wouldn't be another news spike for the remainder of the year to drive up the price typically for TLSA - so in theory the best time to move over to DAF would be shortly thereafter, not Dec 13th.
                    I guess it really depends of what kind of investment you are talking about. If it's something like TSLA, then I would assume that the whole reason that one would invest in it is because one thinks that it will grow faster than the vanilla options in the DAF. So, while it's true that it will grow in the DAF, your whole investment thesis assumes that it will grow faster if invested in TSLA (otherwise, why buy it at all). And if that is the case, then you want growing out of the DAF as much as possible. So you can get more money in the fund and a bigger tax deduction.

                    As far as the other stuff on timing is concerned, you don't really care about the spikes. What you care about is the top. It doesn't matter if there is a huge spike in October. After that it might still creep up further. Or it could creep down. Or it could spike (even if that is unlikely as mentioned above). So on average you should be better off keeping it in there longer.

                    Of course, most people who invest in individual stocks have at least some notion that they can predict these things. So I guess if you want to act on that it's not the worst thing in the world.

                    If we're talking about a mutual fund, as is correctly pointed out above, then growth inside the fund is not really that much different than outside the fund. Nevertheless you would still want to keep the money in the market as long as possible for a larger deduction.

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