Donor-Advised Fund (DAF)

A donor-advised fund (DAF) is a US philanthropic vehicle that lets donors make an immediately tax-deductible contribution to a fund held by a sponsoring charity, then recommend grants to qualified nonprofits over time. Total US DAF assets reached a record $327.87 billion in fiscal year 2024, up 27.9% year over year, across 3.59 million accounts, according to the Donor Advised Fund Research Collaborative's 2025 report.

How Does a DAF Actually Work?

A donor contributes cash, securities or other appreciated assets to a DAF account and receives an immediate tax deduction for the full contribution. The sponsoring organization, a community foundation, financial institution, or specialized provider such as Fidelity Charitable or National Philanthropic Trust, invests the assets, which then grow tax-free, while the donor recommends grants from the fund to charities over months, years or decades. The sponsor retains legal control and fiduciary responsibility but typically follows donor recommendations.

How Fast Is DAF Giving Growing?

US DAF contributions rose 38.6% to $90.57 billion in fiscal year 2024, while grantmaking from DAFs climbed 19% to roughly $64.9 billion, the DAFRC reported. National Philanthropic Trust alone recorded $6.61 billion in grants across more than 161,000 grants in 68 countries in fiscal year 2025, up 20% from the prior year, and held $41.9 billion in net assets as of 2024. DAF assets have grown more than 323% over the past decade, and DAFs and private foundations together accounted for 38% of all individual charitable giving in the US in 2024, nearly double their share a decade earlier.

What Changed for DAF Donors Under the 2025 Tax Law?

The One Big Beautiful Bill Act, signed into law on July 4, 2025, reshapes DAF tax treatment starting in 2026: a new 0.5% adjusted-gross-income floor means donors must give at least that share of their income before any charitable deduction applies, a 35% cap limits the value of itemized deductions for taxpayers in the top 37% bracket, and a new universal charitable deduction of $1,000 ($2,000 for joint filers) lets non-itemizers deduct giving, but explicitly excludes gifts to DAFs, private foundations and supporting organizations. National Philanthropic Trust has advised donors in the top bracket to accelerate large gifts into 2025 to capture the fuller deduction before the new caps take effect.

Why Are DAF Payout Rates Controversial?

Unlike private foundations, which must distribute at least 5% of assets annually, DAFs face no federal minimum payout requirement. The Institute for Policy Studies' 2025 Independent Report on DAFs found median DAF payout rates running around 9-10%, above the foundation minimum, but critics argue the absence of a mandated floor still lets some accounts "warehouse" charitable dollars indefinitely. Congress has considered legislation to impose minimum distribution requirements, though no such federal mandate has passed as of this writing.

How Do Israeli-American Donors Use DAFs?

DAFs are widely used by Israeli-American philanthropists to support Israeli causes: a donor based in the US contributes to a US-based DAF, capturing the US tax deduction, then recommends grants to Israeli nonprofits, leveraging the US's favorable tax treatment of qualifying cross-border charitable giving. Israeli tax authorities have scrutinized DAF-to-Israel transfers to guard against tax abuse, even as specialized DAF sponsors continue to market Israel-focused giving vehicles to diaspora donors.