The Moment
You give to charity regularly — $2,000, $5,000, or more per year. Or you had a high-income year (big bonus, RSU vesting, business sale) and want to maximize the tax benefit of charitable giving. A donor-advised fund (DAF) may be the most powerful tool you are not using.
Since the 2017 standard deduction increase ($14,600 single / $29,200 married in 2025), most people can no longer itemize deductions — which means regular charitable donations provide zero tax benefit. A DAF solves this through "bunching."
How a DAF Works
Step 1 — Open a DAF. Fidelity Charitable, Schwab Charitable, and Vanguard Charitable all offer DAFs with low or no minimums. Opening takes 15 minutes online.
Step 2 — Contribute and claim the deduction. You contribute cash or appreciated securities to the DAF. You receive an immediate tax deduction for the full fair market value. If you contribute appreciated stock, you avoid capital gains tax on the appreciation.
Step 3 — Invest and grow. The money in the DAF can be invested in mutual funds. It grows tax-free while you decide which charities to support.
Step 4 — Grant to charities over time. You recommend grants to any IRS-qualified 501(c)(3) charity, on your own schedule. There is no deadline — you can grant over years or decades.
The bunching strategy: Instead of donating $5,000 per year (and taking the standard deduction because $5,000 is not enough to itemize), contribute $25,000 to a DAF in one year (5 years of donations). In that year, you itemize and deduct the full $25,000. In the other 4 years, you take the standard deduction and distribute grants from the DAF. You get the same charitable impact but a much larger tax benefit.
The Tax Math
Example: Married couple, $200,000 income, $5,000/year in charitable giving.
Without bunching: Standard deduction ($29,200) every year. The $5,000 donation provides zero tax benefit.
With DAF bunching (contribute $25,000 every 5 years): In the bunching year, itemized deductions = $25,000 (charity) + $10,000 (SALT) + $15,000 (mortgage interest) = $50,000. Tax savings vs standard deduction: ($50,000 - $29,200) × 24% = $4,992 in tax savings. Over 5 years, the total charitable giving is identical, but you saved nearly $5,000 in taxes.
Contributing appreciated stock is even better. If you donate $25,000 in stock with a $10,000 cost basis, you deduct $25,000 and avoid $2,250-$3,750 in capital gains tax on the $15,000 gain. Double tax benefit.
Run Your Numbers
See how DAF contributions compound when invested.
Compound Growth Projector
What to explore next
- →Should I contribute appreciated stock to my DAF?
- →How do I set up a charitable giving strategy?
- →What is a Qualified Charitable Distribution (QCD)?
Frequently Asked Questions
What is the minimum to open a DAF?
Fidelity Charitable: $0 to open, $50 minimum grant. Schwab Charitable: $0 to open, $50 minimum grant. Vanguard Charitable: $25,000 minimum initial contribution. For most people, Fidelity or Schwab is the easiest entry point.
Can I get the money back from a DAF?
No. Once you contribute to a DAF, the money is irrevocably committed to charity. You control which charities receive grants and when, but the money cannot be returned to you. Only contribute what you genuinely intend to give.