Tax Pass-Through Modelling · Tax Year 2026
How One Company’s Giving Becomes Deductions for Every K-1 Member
When the entity, a partnership, a multi-member LLC, or an S-corp, gifts to the company’s donor-advised fund, the company does not take the deduction. Every member receives their equity share of it on their K-1 and may deduct it on their own return, within their own limits. Five members, five deductions, from one decision. Here is how it flows, and a model that estimates what it could mean for each of them.
From the Company Account to Each Member’s Fund
The Company Gives
One cash gift from the company account into donor-advised funds, in one tax year.
It Splits on the K-1s
A partnership or S-corp does not deduct it. Each member’s share of the gift appears on their Schedule K-1, by ownership.
Each Member Reports It
Every member reports their slice on their own return, subject to their own 60%-of-AGI ceiling, floor, bracket, and basis in the company.
The Funds Grant Out
The dollars sit in donor-advised funds at the sponsor, granting out on the members’ own timelines. Who is donor of record and how each fund is titled is settled with the sponsor and counsel.
The Example Everyone Asks About
Five equal members. The company gives $500,000 into donor-advised funds this year. Each member’s K-1 carries a $100,000 charitable contribution, which each may deduct on their own return, against their own income, within their own 60%-of-AGI ceiling and their basis in the company. One decision at the company, five slices across five families.
What each $100,000 is worth depends on that member: their bracket, their state, whether they itemize. The model below shows every member side by side, so the group can see the whole picture before anyone signs anything.
Run Your Ownership Group
Enter the company gift, then each member’s share and income. Everything runs in your browser; nothing is stored or sent.
What the Company Puts Into Donor-Advised Funds This Year
Cash, from the company account, in one tax year. It flows to each member on their Schedule K-1 by ownership share.
Each Member’s Share and Income
Shares must follow the operating agreement or the stock ledger; the split is not a choice made at year end. Income is each member’s whole adjusted gross income: salary or guaranteed payments, their share of the company’s profit, and anything else on their return, such as a spouse’s wages or investments. The deduction splits by share; the 60% ceiling runs on that whole income.
One $500,000 company gift is estimated to reduce the members’ taxes by $123,612 combined.
Each member gets their own slice of the deduction, on their own return, against their own bracket. The combined figure is just the sum; nobody receives it as one number.
Estimates for education, not tax advice. Excludes basis limits, the alternative minimum tax, the qualified business income deduction, and state rules that differ from a flat rate. Each member confirms their own numbers with their own CPA.
With these shares, the largest company gift that keeps every member inside their own 60% ceiling this year is $540,000 · . Move a share or an income above and it recalculates.
Two Routes, and the Differences a CPA Weighs
The company can make the gift and let it pass through on the K-1s, or it can distribute the cash first and each member can fund a donor-advised fund personally. The paper result looks similar, but they differ: the company route is limited by each member’s basis, distributing cash first can trigger gain when it exceeds a member’s basis, and some states tax pass-through entities differently. Which route fits the group is a question for its CPA and attorney.
What This Model Assumes
- The company is taxed as a partnership or an S-corporation, so its charitable gifts are not deducted by the company; they pass to the members by ownership share and each member deducts their slice under the individual rules.
- Cash gifts only, to donor-advised funds at IRS-recognized 501(c)(3) public charities: 60% of AGI ceiling, 0.5% of AGI floor, five-year carryforward, and the 2026 top-bracket reduction, per member. A sponsor may decline or condition gifts from an entity.
- Each member’s AGI is entered as you typed it and is assumed to already include their share of company profit. Other deductions and the state rate are applied to every member alike. The state line is illustrative only; states differ (California, for example, caps cash gifts at 50% of AGI and does not follow every federal rule).
- Any company gift, cash included, reduces each member’s basis in the company by their share, and a member’s deduction for the year is limited by that basis. The model does not check basis, at-risk, or passive-activity limits. Gifts of appreciated property through an entity add further basis rules and are not modelled.
- A C-corporation is different: its gift is the company’s own, capped at 10% of taxable income with a 1% floor, at the 21% rate. Use the calculator in C-corp mode for that.
- Ignored: the alternative minimum tax, the qualified business income deduction, guaranteed payments, special allocations, and state rules that differ from a flat rate. Nothing you enter leaves your browser.
How the Split Is Decided
Split by the Operating Agreement
The gift passes through in the shares the operating agreement sets. Special allocations must have substantial economic effect, and each member’s deduction is also limited by their basis in the company that year, so this is decided with counsel before the gift, not after.
Split Strictly by Stock
An S-corp allocates every item, gifts included, pro rata by shares for the days each share was held, unless a closing-of-the-books election applies. Five equal shareholders all year means five equal slices, each still limited by that shareholder’s basis.
The Company’s Own Deduction
A C-corp deducts its own gift, capped at 10% of taxable income with a 1% floor from 2026, at the 21% rate. Nothing reaches the owners’ returns. Whether the owners should give personally instead is a question for the CPA.
Five Questions for the CPA
Every member is a separate taxpayer. The company’s gift is one decision; what it is worth is five different answers.
Who should the donor be?
The company on the K-1s, or each member personally after a distribution. The paper result looks similar, but basis limits, distribution rules, and state pass-through taxes differ.
Does every member have enough basis?
A member’s share of the gift is also limited by their basis in the company that year. A member who has taken large distributions, or whose interest is leveraged, may have to carry it forward.
Does every member clear the standard deduction?
A slice that lands under it does nothing that year. Bunching, or timing the gift to a member’s strong year, may change that.
Is anyone over 60% of their AGI?
The excess carries forward five years. A very large company gift may be better spread over two tax years.
Are the shares current?
Ownership changes mid-year change the split. The K-1 follows the ledger, not the handshake.
Is anyone in the 37% bracket?
From 2026 their itemized deductions are trimmed by 2/37ths, so a dollar deducted is worth about 35 cents federally rather than 37.
Bring the Whole Group to One Call
One free orientation call for the ownership group: an education session on the process, not tax planning, with each member running their own numbers. If it fits, every member starts their own 7-Day Seed together, each with their own fund set up with the sponsor.
Education only. The model gives estimates under the federal rules for tax year 2026 as we understand them; it is not tax, legal, or investment advice, and each member’s results will differ. The model does not check basis, at-risk, or passive-activity limits, the alternative minimum tax, or the qualified business income deduction, any of which can reduce or defer a member’s deduction. State figures are illustrative only; states differ (California, for example, caps cash gifts at 50% of AGI). Allocations must follow the entity’s governing documents. A sponsor may decline or condition gifts from an entity, and how a fund is titled is the sponsor’s policy. Kingdom Portfolios is not a CPA firm, a law firm, or an investment adviser, is not a DAF sponsor, never receives, holds, or invests charitable dollars, and receives no compensation, referral fees, or revenue share from any DAF sponsor or charity, including any sponsor we recommend. Gifts to a donor-advised fund are irrevocable; the assets belong to the sponsoring charity and the donor holds advisory privileges. Confirm everything with your CPA and attorney before the company or any member gives.