What is a donor-advised fund?
A donor-advised fund (DAF) is a charitable giving account held at a sponsoring public charity, such as a community foundation or the charitable arm of a large custodian. You contribute cash, stock, or other assets, take a tax deduction in the year you contribute, and then recommend grants to the charities you choose over time. Money in the account can be invested and grows tax-free until it is granted out.
How a DAF works
- Contribute. Give cash, publicly traded stock, mutual funds, or, at some sponsors, private company shares or real estate. The contribution is irrevocable.
- Deduct. Take the charitable deduction in that tax year, subject to AGI limits: generally 60% of AGI for cash and 30% for appreciated securities held more than a year, with a five-year carryforward for any excess.
- Invest. The balance is invested in the sponsor’s options and grows without tax.
- Grant. Recommend grants to qualified charities whenever you choose, this year or over many years.
Why appreciated stock is usually the better gift
Giving stock you have held more than a year generally lets you deduct its full market value and avoid the capital gains tax you would owe if you sold it first. For a donor with a large, low-basis position, that combination can make a gift of stock worth considerably more than the same gift in cash. The calculator above compares the three common approaches side by side. For more on reducing a large single holding, see our concentrated stock guide.
Bunching and the 2026 rule changes
Because many households now take the standard deduction, a common strategy is to bunch several years of giving into one year through a DAF, itemize that year, and grant the money out over the following years. Starting in 2026, itemizers can deduct gifts only above 0.5% of AGI, and the benefit for top-bracket donors is capped at 35%. A new deduction of up to $1,000 ($2,000 for couples) for non-itemizers applies to cash gifts made directly to charities, not to DAFs. Retirees age 70½ and older should also compare a qualified charitable distribution from an IRA, which cannot be made to a DAF but can lower taxable income directly.
How to donate appreciated stock to a DAF
- Pick the lots. Choose shares held more than a year with the largest gains. Shares held a year or less are deductible only at cost basis.
- Open or confirm your DAF account. Most sponsors let you open an account online in a few minutes.
- Transfer the shares in kind. Use the sponsor’s stock transfer form or ask your custodian to move the shares directly. Do not sell first, or you will owe the capital gains tax yourself.
- Get the written acknowledgment. The sponsor sends a receipt showing the date and the shares received. Your deduction is generally the shares’ fair market value on the day the transfer is completed.
- Grant on your own schedule. The sponsor usually sells the shares, invests the proceeds in the pools you choose, and makes grants when you recommend them.
Transfers can take several business days, so start well before December 31 if you want the deduction this year.
Donor-advised fund fees compared
The three largest national sponsors charge the same administrative fee on the first $500,000. Where they differ is in minimums and how quickly fees fall on larger balances.
| Sponsor | Admin fee, first $500,000 | Minimum to open | Minimum grant |
|---|
| Fidelity Charitable | 0.60% (at least $100 a year) | None | $50 |
| DAFgiving360 (formerly Schwab Charitable) | 0.60% | None | $50 |
| Vanguard Charitable | 0.60% | $25,000 | $500 |
All three step down to lower rates above $500,000, and the investment pools you choose add their own expenses. Confirm current fees with the sponsor before opening an account. Sources: Fidelity Charitable, DAFgiving360, Morningstar on Vanguard Charitable.
Using a DAF at a wirehouse or private bank
Many wirehouses and private banks offer a donor-advised fund through their own charitable program or a partner sponsor, often with an advisor managing the investments. Before you open one, ask for the total annual cost: the sponsor’s administrative fee, the investment expenses, and any advisory fee charged on the DAF balance. Every dollar of fees is a dollar that never reaches a charity, so compare that total with the national sponsors above. For more on how the two models differ, see our wirehouse vs. independent advisor and private bank vs. independent advisor guides.
Frequently asked questions
What is a donor-advised fund (DAF)?
A donor-advised fund is a charitable investment account held at a sponsoring 501(c)(3) such as Fidelity Charitable, Schwab Charitable, or a community foundation. Contributions are irrevocable charitable gifts that generate an immediate income-tax deduction; the donor then recommends grants to qualified charities over time while assets grow tax-free inside the DAF.
Is it better to donate cash or appreciated stock to a DAF?
For long-term appreciated publicly traded securities, donating in-kind to a DAF is almost always more tax-efficient than donating cash. You deduct the full fair market value and permanently avoid the capital-gains tax on the embedded appreciation, producing a combined benefit equal to your income-tax savings plus the LTCG, NIIT, and state tax you would have owed on a sale.
What are the AGI deduction limits for a DAF contribution?
Contributions to a donor-advised fund are deductible up to 60% of AGI for cash and 30% of AGI for long-term appreciated publicly traded securities valued at fair market value. Any amount over the limit carries forward for up to five years.
What is bunching, and how does a DAF help?
Bunching means consolidating several years of planned charitable giving into one tax year so the total clears the standard deduction and produces a meaningful itemized deduction. A DAF makes bunching practical because you take the full deduction in the contribution year while still distributing grants to charities on your normal cadence.
When does a DAF make the most sense?
DAFs are most valuable in high-income years (a liquidity event, business sale, large bonus, or Roth conversion), when bunching multiple years of giving, when offsetting embedded gains in concentrated low-basis stock, or when establishing a multi-generational giving vehicle without the legal and administrative cost of a private foundation.
How do the 2026 tax law changes affect charitable giving?
Starting in 2026, itemizers can deduct charitable gifts only to the extent they exceed 0.5% of adjusted gross income, and taxpayers in the 37% bracket receive a tax benefit capped at 35% on itemized deductions. Non-itemizers can deduct up to $1,000 (single) or $2,000 (joint) of cash gifts to qualifying charities, but gifts to donor-advised funds do not count toward that deduction.
What is the difference between a donor-advised fund and a private foundation?
A donor-advised fund is an account at a sponsoring charity: it is inexpensive to open, requires no separate tax filings, and offers higher deduction limits, but the sponsor has final legal control over grants. A private foundation is a separate legal entity that the family controls and can employ family members, but it has higher costs, a 5% annual payout requirement, an excise tax on investment income, public tax filings, and lower deduction limits.
How much does a donor-advised fund cost?
Most national DAF sponsors charge an annual administrative fee of about 0.60% on the first $500,000, stepping down on larger balances. As of October 2026, Fidelity Charitable charges 0.60% (minimum $100 a year) and DAFgiving360 charges 0.60%, each tiering down to 0.30% on the next $500,000 and lower above that. Neither requires a minimum initial contribution, and the minimum grant is $50. Underlying investment pools add their own expenses (Fidelity Charitable lists 0.015% to 0.93%), and an advisor-managed DAF may add an advisory fee. Fees reduce what is ultimately granted, so compare the total cost against a private foundation or direct gifts. Sources: Fidelity Charitable, DAFgiving360.
Should I open a donor-advised fund through my wirehouse or private bank?
You can, and it may be convenient if your advisor manages the investments. Ask for the total annual cost, including the sponsor’s administrative fee, investment expenses, and any advisory fee on the DAF balance, and compare it with national sponsors such as Fidelity Charitable, DAFgiving360, and Vanguard Charitable, which charge about 0.60% a year on the first $500,000.