Donor-Advised Fund
A charitable investment account where donors receive an immediate tax deduction and recommend grants to nonprofits over time.
What is DAF?
A donor-advised fund (DAF) is a charitable giving vehicle administered by a sponsoring organization, such as Fidelity Charitable or Schwab Charitable. Donors make irrevocable, tax-deductible contributions, invest the assets tax-free for potential growth, and then recommend grants to qualified charitable organizations over time. DAFs allow donors to take an immediate tax deduction in a high-income year while distributing charitable grants in future years.
Example
A taxpayer donates $50,000 in appreciated stock to a DAF in a high-income year, receiving an immediate tax deduction at full market value while avoiding capital gains tax on the appreciation. Over the next several years, they direct grants to their preferred charities at their own pace.