Maximizing Charitable Giving for P&G Employees: The Donor Advised Fund Advantage
Introduction
Procter & Gamble employees have a long-standing tradition of giving back to their communities, often through payroll deductions benefiting organizations like United Way and ArtsWave. While payroll deductions offer convenience, they may not be the most tax-efficient way to give. By utilizing a Donor Advised Fund (DAF) and funding it with appreciated stock, P&G employees can enhance their giving impact while maximizing tax benefits.
Why Use a Donor Advised Fund Instead of Payroll Deductions?
Payroll deductions provide an immediate, simple way to donate, but they have significant drawbacks compared to a DAF:
- Lost Tax Deduction Opportunities – Payroll deductions are post-tax, meaning employees do not receive an upfront deduction unless they itemize deductions.
- Missed Opportunity to Donate Appreciated Stock – Many employees hold P&G stock with significant capital gains. Selling this stock triggers capital gains tax, whereas donating it to a DAF eliminates this tax burden.4
- Lack of Bunching Benefits – A DAF allows for tax-efficient "bunching," where multiple years' worth of charitable contributions can be donated at once to exceed the standard deduction threshold.
The Benefits of Funding a Donor Advised Fund
- Immediate Tax Deduction – Contributions to a DAF are deductible in the year they are made, offering flexibility in tax planning.1 Additionally, a DAF allows donors to separate the act of giving from receiving the charitable deduction, enabling more strategic tax planning.8
- Avoid Capital Gains Taxes – Donating appreciated stock directly to a DAF eliminates capital gains tax, ensuring that more of the asset's value goes to charity instead of the IRS.4
- Flexibility in Granting Funds – A DAF allows donors to control when and how funds are distributed to charities over time.12 It also provides the convenience of tracking all charitable giving in one place or portal, simplifying donation management and record-keeping.13
- Strategic Philanthropy – Employees can continue supporting United Way, ArtsWave, and other charities of their choice, but in a tax-efficient manner. A DAF also allows donors to send checks to charities instead of transferring shares of stock, simplifying the donation process for both the donor and the recipient organization.
How P&G Employees Can Use a DAF for Charitable Giving
- Establish a Donor Advised Fund – Open a DAF with a provider such as Fidelity Charitable, Schwab Charitable, or your preferred custodian.5 6
- Fund the DAF with Appreciated P&G Stock – Transfer shares directly to the DAF to maximize tax benefits.7 These shares can be reinvested inside the DAF, if desired, based on the giving window. All growth then goes to charity, not the IRS.
- Take the Charitable Deduction in the Year of Contribution – This helps employees optimize their tax situation, particularly if they bunch contributions. Work with your advisor to optimize how you bunch your charitable giving based on the current tax landscape.
- Select United Way or ArtsWave as a Beneficiary – During P&G’s annual open enrollment, employees can direct their DAF to distribute grants to these organizations. This way, P&G is still able to track your giving, but the charities receive the funds from your DAF rather than through payroll deductions.
- Continue Supporting Charities Over Time – Unlike payroll deductions, which are deducted every paycheck, a DAF allows employees to distribute grants on their own schedule.13
Example of Tax Savings
Consider a P&G employee who donates $10,000 per year to United Way via payroll deductions. If the employee instead funds a DAF with $50,000 in appreciated P&G stock (bunching five years of giving), they:
Meet
Brad Morgan
Hi there! 👋🏼 I'm Brad, a former Procter & Gamble employee turned financial advisor. With a focus on tax planning, I've been a trusted advisor for the P&G community for over ten years.
Reference:
1 https://www.nptrust.org/what-is-a-donor-advised-fund/daf-tax-consideration/
4 https://www.investopedia.com/ask/answers/07/donatestock.asp
5 https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Fidelity_Charitable.pdf
6 https://www.easterseals.com/co/shared-components/document-library/schwab-charitable/schwab-charitable-education.pdf
8 http://www.vanguardcharitable.org/donor-advised-fund-benefits
12 https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html
13 https://convoyofhope.org/articles/donor-advised-fund/
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth Inc. is a technology company. Savvy Advisors, Inc. is an SEC registered investment advisor. For purposes of this article, Savvy Wealth and Savvy Advisors together are referred to as “Savvy”. All advisory services are offered through Savvy Advisors, while technology is offered through Savvy Wealth. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors.
Maximizing Charitable Giving for P&G Employees: The Donor Advised Fund Advantage
Introduction
Procter & Gamble employees have a long-standing tradition of giving back to their communities, often through payroll deductions benefiting organizations like United Way and ArtsWave. While payroll deductions offer convenience, they may not be the most tax-efficient way to give. By utilizing a Donor Advised Fund (DAF) and funding it with appreciated stock, P&G employees can enhance their giving impact while maximizing tax benefits.
Why Use a Donor Advised Fund Instead of Payroll Deductions?
Payroll deductions provide an immediate, simple way to donate, but they have significant drawbacks compared to a DAF:
- Lost Tax Deduction Opportunities – Payroll deductions are post-tax, meaning employees do not receive an upfront deduction unless they itemize deductions.
- Missed Opportunity to Donate Appreciated Stock – Many employees hold P&G stock with significant capital gains. Selling this stock triggers capital gains tax, whereas donating it to a DAF eliminates this tax burden.4
- Lack of Bunching Benefits – A DAF allows for tax-efficient "bunching," where multiple years' worth of charitable contributions can be donated at once to exceed the standard deduction threshold.
The Benefits of Funding a Donor Advised Fund
- Immediate Tax Deduction – Contributions to a DAF are deductible in the year they are made, offering flexibility in tax planning.1 Additionally, a DAF allows donors to separate the act of giving from receiving the charitable deduction, enabling more strategic tax planning.8
- Avoid Capital Gains Taxes – Donating appreciated stock directly to a DAF eliminates capital gains tax, ensuring that more of the asset's value goes to charity instead of the IRS.4
- Flexibility in Granting Funds – A DAF allows donors to control when and how funds are distributed to charities over time.12 It also provides the convenience of tracking all charitable giving in one place or portal, simplifying donation management and record-keeping.13
- Strategic Philanthropy – Employees can continue supporting United Way, ArtsWave, and other charities of their choice, but in a tax-efficient manner. A DAF also allows donors to send checks to charities instead of transferring shares of stock, simplifying the donation process for both the donor and the recipient organization.
How P&G Employees Can Use a DAF for Charitable Giving
- Establish a Donor Advised Fund – Open a DAF with a provider such as Fidelity Charitable, Schwab Charitable, or your preferred custodian.5 6
- Fund the DAF with Appreciated P&G Stock – Transfer shares directly to the DAF to maximize tax benefits.7 These shares can be reinvested inside the DAF, if desired, based on the giving window. All growth then goes to charity, not the IRS.
- Take the Charitable Deduction in the Year of Contribution – This helps employees optimize their tax situation, particularly if they bunch contributions. Work with your advisor to optimize how you bunch your charitable giving based on the current tax landscape.
- Select United Way or ArtsWave as a Beneficiary – During P&G’s annual open enrollment, employees can direct their DAF to distribute grants to these organizations. This way, P&G is still able to track your giving, but the charities receive the funds from your DAF rather than through payroll deductions.
- Continue Supporting Charities Over Time – Unlike payroll deductions, which are deducted every paycheck, a DAF allows employees to distribute grants on their own schedule.13
Example of Tax Savings
Consider a P&G employee who donates $10,000 per year to United Way via payroll deductions. If the employee instead funds a DAF with $50,000 in appreciated P&G stock (bunching five years of giving), they:
Meet
Brad Morgan
Hi there! 👋🏼 I'm Brad, a former Procter & Gamble employee turned financial advisor. With a focus on tax planning, I've been a trusted advisor for the P&G community for over ten years.
Reference:
1 https://www.nptrust.org/what-is-a-donor-advised-fund/daf-tax-consideration/
4 https://www.investopedia.com/ask/answers/07/donatestock.asp
5 https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Fidelity_Charitable.pdf
6 https://www.easterseals.com/co/shared-components/document-library/schwab-charitable/schwab-charitable-education.pdf
8 http://www.vanguardcharitable.org/donor-advised-fund-benefits
12 https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html
13 https://convoyofhope.org/articles/donor-advised-fund/
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth Inc. is a technology company. Savvy Advisors, Inc. is an SEC registered investment advisor. For purposes of this article, Savvy Wealth and Savvy Advisors together are referred to as “Savvy”. All advisory services are offered through Savvy Advisors, while technology is offered through Savvy Wealth. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors.
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