Jared GoetzZenpire · CEO & Founder at Zendrop

Most people think charities and taxes have nothing to do with each other...

18 May 2026 · 1 min

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In this segment, the presenter explains how a private family foundation, classified as a 501(c)(3) organization, can be used for philanthropic purposes while offering significant tax benefits. The IRS permits donors to deduct contributions up to 30% of their adjusted gross income (AGI) when they fund their own private family foundation. However, the foundation must annually distribute at least 5% of its charitable assets to other qualified charities or 501(c)(3) entities. The speaker illustrates the rules with a concrete example: with a $300,000 AGI, a donor could contribute $90,000 to the foundation, receive a $90,000 tax deduction, and then must distribute $4,000 (5% of $90,000) each year. The presenter also highlights permissible ways to use foundation assets, such as hosting charitable events, fundraising parties, or issuing grants to organizations like the Boys & Girls Club or to individual students preparing for college.

Chapters

A private family foundation is a 501 that you can set up with the intent to be philanthropic. The IRS will allow you to donate 30% of your adjusted gross income into a private family foundation for a tax deduction. 5% of the charitable assets that sit inside your foundation have to be donated to another 501 or qualifying charity of your choice. So if I have $300,000 of adjusted gross income, that means I can contribute $90,000 to my own private family foundation. I just received a $90,000 deduction. There's $90,000 sitting in that foundation now. I only have to go deploy 5% 5% of that $90,000. I have to write a $4,000 check to some charity. What if I use the foundation? I want to put on my own charitable event. I want to throw a party at my house and bring everybody, and we're going to raise money to give back to the Boys and Girls Club or create a grant for the student who's getting ready to go to college. These are the things that I can use those assets for.