What Is a Donor-Advised Fund (DAF)? A Tax-Smart Way to Give

A donor-advised fund (DAF) is a charitable giving account, typically offered through a brokerage or community foundation, that lets you contribute cash or appreciated assets, take an immediate tax deduction, and then recommend grants to specific charities on your own timeline — even years later.

How a DAF Works

• You contribute cash, stock, or other assets to the fund and get an immediate tax deduction for that year
• The funds are invested and can grow tax-free while you decide where to give
• You submit grant recommendations to IRS-qualified charities whenever you're ready — the sponsoring organization handles the actual disbursement

Why People Use DAFs: 'Bunching' Donations

Since the standard deduction is high, many people no longer get a tax benefit from itemizing small annual donations. A DAF lets you 'bunch' several years of giving into one large contribution, itemize and deduct that bigger amount in a single year, and then distribute the money to charities gradually over the following years.

Donating Appreciated Stock Instead of Cash

If you donate appreciated stock you've held over a year directly to a DAF, you avoid paying capital gains tax on the appreciation entirely, while still deducting the full fair market value — a bigger benefit than selling the stock and donating the cash proceeds.

Things to Know

• Contributions are irrevocable — once in the DAF, the money must eventually go to charity
• Most funds have low minimums to open ($0-$5,000) and charge a small annual administrative fee
• You lose direct control once contributed, but retain 'advisory' input on where grants go