Guidelines and Limits on Donor-Advised Funds

You may already know that donating through a Donor-Advised Fund (DAF) is an excellent way to help charities and possibly save on your own taxes, but there are a few details to keep in mind:

Donor Advised Fund Tax Deduction Limits

If you are intending to donate cash to your donor-advised fund, your tax deduction is limited to 60% of your adjusted gross income that year. This limit runs through 2025. You may consider spacing out your contributions over multiple years if your gift is going to be a significant percentage of your income.

Donating appreciated stock can be a good way to help you save on capital gains taxes (and leave more money for the charity!), but you are limited to just 30% of your adjusted gross income (AGI) if you donate this way.

Donor Advised Funds are often a great choice for years when you have very high income and can take advantage of significant tax deductions.

Example Tax Deduction From a DAF

For example, let’s say you have a year with taxable income of $1 million due to a sale of a business, real estate, stock options be exercised, large stock sale, or any other reason. Let’s also assume you typically give $20,000 per year to a charity.

A donor advised fund will allow this household to make a large one-time donation to a DAF equal to many years of donations, receive a large upfront tax deduction for the lump sum amount, but continue to send $20,000 annually to the charity.

We can help this household determine the optimal amount to donate to the donor advised fund, and compare the impact of using a donor advised fund to other alternatives:


Minimum Donation Amounts and Fees

For accounts at two of the biggest providers, Schwab and Fidelity, there is no minimum initial contribution.

Fees for the account start at 0.6% per year, and drop with larger balances. There are also fees for the investment funds, which can range from a few hundredths of a percent for simple index funds to more expensive and unpredictable funds.

Grants, that’s what gifts to charity from the account are called, can be done in small amounts, usually $50 or more. For those big providers like Schwab and Fidelity, the grants are done online simply and quickly.


Wondering what the best way is to support the causes you care about while also providing you the best tax benefits? Contact us today and let us help create a charitable giving plan for you:

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