ILLUSTRATION:
In 2021 the standard deduction is $12,550 for singles filers and married filing separately, $25,100 for joint filers and $18,800 for head of household.
Let’s say you are single, and you donate $5000 a year to your favorite public charity. To receive a charitable tax deduction your total itemized tax deductions must exceed the standard deduction of $12,550. Otherwise, you’ll not receive any tax benefits for these contributions. So, your $5000 annual donation most likely won’t yield you any tax deduction.
So instead of giving $5000 directly to your favorite causes this year, you could instead put $20,000 into your Donor Advised Fund this year. You then report the $20,000 charitable contribution to your DAF as an itemized deduction on your 1040 and hopefully reduce your taxes.
Then from the $20,000 in your DAF you continue to give $5000 a year over the next 4 years. You are essentially front loading your charitable giving to receive a tax deduction.