Maximizing Microsoft’s Charitable Giving Program through a Donor-Advised Fund (DAF)
What is the Microsoft Employee Giving Program?
For years, Microsoft has led the tech industry by consistently improving the benefits that it offers employees. One such benefit is the Microsoft Giving Campaign. This provides a one-to-one match up to $15,000 per year, to a non-profit 501(c)(3) of your choice. This means that an employee can donate $15k to a charity that they care about, and Microsoft will match the full donation, dollar for dollar.
How to Donate
Microsoft has partnered with Benevity, a charitable donation payroll deduction platform. This means that Microsoft employees can now elect to make charitable contributions via payroll deductions and debit/credit card payments through Benevity, in addition to traditional donation methods like direct contributions and donor-advised funds.
How to Optimize your Donation via a Donor-Advised Fund (DAF)
Take a tax deduction for it
Making charitable contributions in support of a cause you care about can also help in your wealth-building strategy. To take advantage of the eligible tax deduction for your charitable contribution you’ll have to be able to itemize your taxes, which has become more difficult since the increase in standard deduction. One strategy to increase your deductions is by doing lump sum Gift-Bunching. Here’s how it works, let’s say that you donate $1k a year to a charity of your choice. A $1k charitable deduction is not likely to push you into the bucket of itemizing your taxes. In lieu of donating only $1k/year, why not consider donating $15k this year, so you can take a larger tax deduction.
Spread your donation over many years
The biggest drawback to gift-bunching is the idea of having to do one large donation vs. doing a small consistent donation every year. There’s a solution to that problem. Donor-advised funds. Donor-advised funds, or “DAFs” for short, are investment accounts that are established as 501(c)(3) non-profit organizations. When you contribute into a donor-advised fund, the IRS recognizes it as a donation in the year in which it enters the account. You can then make distributions from the DAF to any number of non-profit 501(c)(3) organizations and spread out those distributions over time. In the tax deduction example above, this could allow you to take the full $15k deduction by gift-bunching in one year and give you some control by being able to distribute $1k/year over the next 15 years.
Get a matching contribution
As a Microsoft employee, Microsoft will match your calendar year contribution up to $15k/year with no minimum contribution. You’ll just need to verify that the organization of your choice is an eligible 501(c)(3). Many of the larger brokerage firms offer DAFs that qualify such as Fidelity Investments, The Giving Account.
Important: Microsoft will match your contribution only after you make the distribution from the DAF to your chosen non-profit organization. They will not match your contribution to the DAF directly.
Grow your Charitable Donation
One of the best features of contributing to a DAF is the ability to continue investing your donation. When a contribution enters a DAF, it gets reinvested into an investment strategy of your choosing. This means that you may have the ability to donate even more to the charity of your choice if the investments grow over time. For example, if you donated $15k today and decided to make $1k incremental donations each year thereafter, you would have $14k of your remaining gift still in your account growing based on the portfolio strategy you elected.
Avoid Capital Gains
Donor-advised funds can accept either cash and/or investments, without having to sell the investment prior. That means you can donate low cost-basis shares to the DAF, and take the deduction for the current fair market value. Since you didn’t sell the shares, there is no tax liability by having to sell stock or a property thus saving you money on long or short-term taxable gains. The charity that receives your donation, in this case the DAF, will not be subject to the short- or long-term capital gains on your asset as they are a 501(c)(3) organization. A win-win situation for both you and the charity!
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