Each year, we highlight the benefits of Donor Advised Funds (DAFs) to help clients maximize their charitable giving.
In 2025, this conversation takes on new urgency, as changes introduced by the One Big Beautiful Bill Act (OBBBA) begin to reshape how deductions are handled. With new thresholds and limitations on the horizon, now may be an ideal time to revisit DAF strategies and consider funding ahead of the 2026 rules.
I believe DAFs are a great tool for continuing to give to charity while receiving a deduction. As a refresher: a DAF is an account set up by making an irrevocable donation to an account solely for the purpose of making charitable donations both now and in the future.
If properly funded, a DAF can benefit a donor in a few key ways:
For example, if a person bought 100 shares of a stock or mutual fund at $100 a share, and it has increased to $300 a share – by donating these shares they receive a tax deduction in the year the donation was made of $30,000 (the appreciated amount), and they avoid the capital gains tax of $20,000.
Using the example above, the $30,000 can be invested, enabling the $30,000 to continue to appreciate.
Going forward, the client now has a $30,000 pool of money to make donations (potentially anonymously, if they so choose) until the money runs out.
Donor-Advised Funds (DAFs) remain a popular choice for donors who want flexibility and long-term planning. Contributions to DAFs are eligible for immediate tax deductions—up to 60% of adjusted gross income (AGI) for cash and 30% for appreciated assets in 2025.
However, starting in 2026, deductions for DAF contributions will only be available to itemizers and must exceed a minimum threshold of 0.5% of AGI to qualify. For example, if someone has $200,000 in AGI, the first $1,000 will not be deductible. For this reason, it may be a good idea to consider funding a DAF and bundling a few years’ worth of deductions in 2025 before the floor kicks in next year.
It is important to note that when a donation (in DAF parlance, a grant) is made from a DAF, it does not give the account holder an additional deduction. The tax deduction is taken at inception, or with subsequent contributions to a DAF only.
Many custodians such as Vanguard, Fidelity, and Charles Schwab offer dedicated platforms for managing DAFs. There are also community-based options like the Jewish Communal Fund and other public charities.
When selecting a provider, be sure to review:
Eligible public charities include the wide range of charitable organizations such as:
Charitable giving remains one of the most powerful ways to make a lasting impact, both in your community and in your financial plan. While upcoming tax law changes may introduce new hurdles, strategic tools like Donor-Advised Funds still offer meaningful opportunities to give with purpose and efficiency.
If you’re considering a DAF or want to explore how to maximize your deductions before 2026, now may be a good time to act. We’re here to help you navigate the new landscape and tailor a giving strategy that aligns with your goals. Please do not hesitate to call us.
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