Key Takeaways
A 2025 tax law limiting charitable deductions has triggered a surge in wealthy Americans using donor-advised funds (DAFs) to maximize their tax savings. Major providers reported a rush of new accounts and contributions in late 2025 as donors sought to get ahead of the new rules that started in 2026, a trend that has continued this year.
"If somebody might give $50,000 a year, we’d be suggesting they contribute anywhere from four to eight times that," Scott DeSantis, chief executive officer at Boston-based Civic Financial, said. His firm, which advises law-firm partners and private-equity executives, saw assets in such vehicles more than double between the law's passage and the end of 2025.
The strategy proved popular across the industry. National Philanthropic Trust, a major DAF provider, saw new accounts increase 123 percent in November and December 2025 from a year earlier, totaling over 3,700. Vanguard Charitable reported a 99 percent increase with almost 2,600 new accounts in the same period, while DAFgiving360, formerly Schwab Charitable, saw contributions climb roughly 50 percent year-over-year in the fourth quarter.
The primary driver is a strategy known as "bunching," where donors contribute several years' worth of planned charitable gifts at once. For a high earner, this allowed them to take a larger, onetime deduction in 2025 before new limitations took effect. For someone making $1 million a year and planning to give $10,000 annually, bunching $40,000 of donations into a DAF in 2025 could yield federal tax savings between $5,000 and $7,400 over four years, according to certified public accountant Miklos Ringbauer.
The new tax law introduced a floor on charitable deductions, making donations below 0.5 percent of adjusted gross income non-deductible starting in 2026. By bunching deductions, donors can more easily clear this new threshold in the year they contribute. Funding a DAF with highly appreciated stock is particularly effective, as it allows the donor to avoid capital-gains taxes on the investment's growth while taking an immediate deduction for the full market value. The funds can then be invested tax-free within the DAF and granted to charities over several years.
This strategy isn't limited to the ultrawealthy. Nelson and Christy Matzen, financial planners in New York, used a DAF in 2025 to donate appreciated stocks and exchange-traded funds. "We said: Let’s get the full tax benefit instead of having higher hurdles going forward," said Christy Matzen. For 2026 and 2027, they plan to fund most of their charitable gifts from their DAF.
The growth in DAFs, which held $326 billion across 3.56 million accounts in 2024, has drawn criticism. Unlike private foundations, DAFs have no federally mandated annual giving requirements, leading to concerns that donors are using them to park assets indefinitely. Data from the Donor Advised Fund Research Collaborative shows that about 25 percent of total assets in DAFs at the end of 2023 were paid out in grants the following year. Some providers, like San Francisco-based Regenerative Social Finance, are now waiving fees on DAF money invested in its impact loan fund to encourage deployment of the capital.
This article is for informational purposes only and does not constitute investment advice.
