What Is a Donor-Advised Fund (DAF)?

A donor-advised fund, or DAF, is a popular type of planned giving vehicle established at a public charity, most commonly with a community foundation. It allows a donor to make a charitable contribution, receive an immediate tax deduction and then recommend grants to organizations of their choosing, like Children’s Health, from the fund over time. A donor can contribute to their DAF as often as they’d like and recommend distributions whenever it is best for them.

How do Donor-Advised Funds work?

A donor can contribute an array of private or public assets that extend beyond cash to a donor-advised fund. How it works:

• A donor makes an irrevocable contribution to the DAF and can take an immediate tax deduction

• The assets in the DAF may be invested and any investment growth is tax-free for the donor

• The donor recommends grants from the DAF assets to support qualified nonprofits of their choice

What Are the Benefits of a Donor-Advised Fund?

DAFs allow donors to give when, what, how and where is most favorable for them. Benefits of donor advised funds include:

• Receiving a tax deduction for each contribution to the DAF

• Contributing immediately, building a philanthropic strategy and donating when you’re ready

• Growing your contributions over time, making more charitable dollars available to nonprofits

• Guaranteeing your philanthropic dollars reach the causes you care about with an irrevocable contribution

• Simplify organization and administration of your hard-earned dollars designated for charity

• Creating a charitable legacy

• Choosing how you are acknowledged

• Developing a philanthropic vision and philosophy

• Reaching international charities and non-governmental organizations while still receiving federal tax credit

What is the Difference Between a DAF and Private Foundation?

There are similarities between DAFs and private foundations in that they are both charitable vehicles to invest in and make grants from, but they are not the same. DAF funds provide the benefits of a private foundation without the complexity, administrative burden or additional expenses. Specific differences between DAFs and private foundations are:

What are the Donor-Advised Fund Tax Deductions?

Once a donor makes a DAF contribution, they are eligible for a DAF tax deduction the year the gift was made – like giving to a public charity. Other donor-advised fund tax benefits include:

• Donating cash, via check or wire transfer and generally being eligible for a donor-advised fund tax deduction of up to 60 percent of your adjusted gross income

• Becoming eligible for a donor-advised fund tax deduction of the full fair-market value of the asset, up to 30 percent of your adjusted gross income

• Eliminating capital gains tax on long-term appreciated assets (assets held for more than one year)

• Donations exceeding limits can be carried over for up to five tax years