Empowering your Philanthropy

Since contributions to a DAF are considered gifts to a public charity, you are eligible for a tax deduction in the calendar year the contribution is made. Cash donations via check or wire transfer can typically be deducted up to 60% of your adjusted gross income (AGI), with the option to carry forward unused deductions for up to five years.

By controlling when you contribute to your DAF, you can strategically manage the timing of your tax deductions while planning future grant distributions to your chosen charities.

DAFs can help reduce your tax burden in a windfall year, such as when receiving an inheritance, selling a business, or experiencing significant market gains. By making a charitable contribution to your DAF during such a year, you can take an immediate tax deduction, lowering your taxable income. This approach allows you to pre-fund years of charitable giving from a single high-income event, while distributing the grants over time.

Donating appreciated assets, such as publicly traded securities, directly to your DAF is a particularly tax-efficient strategy. Securities held for more than one year can be donated at their fair market value without incurring capital gains taxes. This is more beneficial than liquidating the assets and donating the proceeds, which would be reduced by capital gains taxes. Donors can take an immediate tax deduction of up to 30% of their AGI for gifts of appreciated securities, mutual funds, real estate, and other assets, with a five-year carry-forward deduction for contributions exceeding AGI limits.

The assets in your donor-advised fund can be invested and potentially grow tax-free before being granted out to charities. As the market value of your DAF increases, so does the amount available for grantmaking. Importantly, while you receive an immediate tax deduction for contributions to your DAF, any growth within the fund is not subject to taxes, as the assets are owned by the DAF’s charitable sponsor.