What it is
A charitable investment account at a sponsor (Fidelity Charitable, Schwab Charitable, NPT, community foundations). Contributions are irrevocable charitable gifts — you take the deduction now, then recommend grants to qualified 501(c)(3) charities later.
How it works
Contribute cash, appreciated securities, or other assets. Take an income-tax deduction for the year of contribution (subject to AGI limits). Assets grow tax-free inside the DAF. Recommend grants on your timeline — this year, next year, or over decades.
Where it fits
High-income years (liquidity event, big bonus, Roth conversion). "Bunching" several years of giving into one to clear the standard deduction. Donating low-basis stock to wipe out an embedded gain. Building a multi-generational giving vehicle without the cost of a private foundation.
The Gift
The amount you intend to give to charity.
Original purchase price. Assumes long-term holding (> 1 year).
Used to check the AGI deduction limit (60% cash / 30% appreciated stock to a DAF). Excess carries forward 5 years.
Your Tax Profile
Applied to both the income deduction and the avoided capital gain. Adjust if your state doesn't conform.
A · Donate Cash
B · Sell Stock, Donate Proceeds
C · Donate Appreciated Stock In-Kind
What assets to consider giving
- Long-term appreciated public stock or ETFs — the cleanest win. Deduct FMV, skip the gain entirely.
- Concentrated low-basis positions — trim risk and capture full FMV deduction in one move.
- RSU/ISO stock held > 1 year — same treatment as any LTCG security.
- Pre-IPO or restricted shares — possible but requires a qualified appraisal and sponsor acceptance.
- Privately-held business interests, real estate, crypto — many DAF sponsors accept these; appraisal and timing rules apply.
- Cash — simplest and gets the highest AGI limit (60%). Use when you have no embedded gains worth harvesting.
- Avoid donating losers. Sell first, claim the loss, then donate the cash — you get both tax breaks.
- Avoid short-term holdings. Deduction is limited to basis, not FMV.
How this works
Cash donation generates a deduction equal to the gift, valued at your combined federal + state marginal rate. Selling stock first triggers capital gains tax (LTCG + NIIT + state) on the appreciation, leaving less to donate and a smaller deduction. Donating stock in-kind to a public-charity DAF lets you deduct full FMV and permanently avoid the embedded gain — the charity inherits your zero-cost basis but pays no tax when it sells.
AGI limits for gifts to a DAF: 60% of AGI for cash, 30% of AGI for long-term appreciated securities at FMV. Anything above the limit carries forward up to 5 years. The deduction only matters if you itemize — "bunching" several years of gifts into one DAF contribution is a common way to clear the standard deduction.