After TaxTax Playbook

Tax Playbook · Giving, strategically

Private foundations

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A private foundation is your own charitable fund that you control — but it must give away about 5% of its investment assets every year, and its investment income pays a 1.39% tax. Strict rules ban deals between the fund and you or your family; breaking them can trigger 10% taxes, with much bigger penalties if uncorrected. A donor-advised fund is cheaper and simpler with no payout rule; a foundation gives more control but more paperwork. A $2 million foundation generally must pay out roughly $100,000 in qualifying gifts each year.

Good for: Major donors wanting maximum control over charitable giving.

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Educational summary, not tax advice. Limits and rules change — confirm current law with your tax adviser.