High-income families and philanthropic investors are increasingly turning to donor-advised funds (DAFs) to
support the causes they care about, while also reducing taxes. DAFs enable donors to contribute cash or
appreciated assets, secure an immediate tax deduction, and then recommend grants to charities over time. They’re also convenient and widely offered through major custodians.
But 2025 is not just another year for charitable planning.
Beginning in 2026, sweeping changes under the One Big Beautiful Bill Act (OBBBA) will significantly restrict
charitable deduction benefits, especially for donor-advised fund contributions. Several current advantages
decline after 2025, creating a planning window that is too valuable to ignore.
How Donor-Advised Funds Work
A DAF allows you to:
-
- Contribute assets (cash or appreciated securities)
- Receive a deduction in the year contributed
- Avoid capital gains tax on appreciated assets
- Invest the funds tax-free inside the DAF
- Recommend grants to charities later
-
- A high-income year
- A large bonus, equity vesting, or business liquidity event
- High unrealized gains on securities
administration
Let's illustrate through an example.
An investor holding stock purchased at $40 per share and now worth $300 per share can donate it directly into a
DAF.
- Immediate deduction for the full fair-market value of $300 per share
- No capital gains tax owed on appreciation of $260 per share
- Investment growth inside the DAF continues tax-free
That makes appreciated-asset contributions one of the most tax-efficient giving strategies available. It
can also be a great strategy for rebalancing a portfolio and reducing stock concentration
Trump's Tax Bill: What Changes for Charitable Giving in 2026
Beginning with the 2026 tax year, OBBBA introduces new charitable deduction limitations:
| Taxpayer Type | New Rule |
| Individuals who itemize | Charitable deductions allowed only for amounts exceeding 0.5% of AGI |
| High-income individuals | Max deduction benefit reduced to ~35% (down from 37%) |
The OBBBA (One Big Beautiful Bill) provides an opportunity to make non-itemized, above-the-line charitable deductions ($1,000 for single filers and $3,000 for joint filers); however, contributions to donor-advised funds are ineligible.
What the One Big Beautiful Bill Act (OBBBA) Means for Donor-Advised Funds
- Deductions for DAF contributions in 2026+ become less valuable
- Moderate donors may lose deductions entirely due to the new 0.5% AGI floor
- Those in the top marginal tax bracket will receive lower marginal tax savings per dollar donated
These are strong incentives to accelerate contributions in 2025.
Key Strategies to Consider for Your Donor-Advised Fund in 2025
Strategy #1: Front-load giving into 2025
If you plan to give over multiple years, contribute several years at once to your DAF now, then grant later.
Strategy #2: Donate appreciated assets
Lock in capital-gain avoidance under today's rules.
Strategy #3: Use 2025 to offset unusually high income
Those with larger bonuses or other compensation packages can realize considerable tax benefits.
Strategy #4: Ensure your contribution clears this year
The deduction applies only if the asset is irrevocably transferred in 2025
Strategy #5: Ensure your contribution clears this year
Carry-forward deduction strategy may further enhance tax value.
Even with stricter rules ahead, donor-advised funds remain:
- Flexible
- Tax-efficient vs. direct cash-only giving
- A great tool for legacy family philanthropy
However, the best financial outcome is realized if you act before tax reform takes effect.
Incorporating Charitable Giving Into A Comprehensive Financial Planning Strategy
Donor-advised funds provide a rare combination of:
- Tax savings today
- Avoiding capital gains
- Philanthropic control and flexibility
Because OBBBA introduces less favorable tax opportunities beginning in 2026 that take a meaningful bite out
of tax benefits for many donors.
Our integrated team of portfolio managers, financial advisors, and CPAs helps our clients leverage strategies like donor-advised funds to accomplish their goals, but charitable giving is just one of the many goals our advisors can help clients accomplish on their road to financial independence. If you'd like to learn how we can help you position your financial plan to achieve your philanthropic goals, you can learn more about our process here.
