Donor-advised funds (DAFs): how they work

A donor-advised fund is a charitable account you open at a sponsoring organization (Fidelity Charitable, Schwab Charitable, a community foundation). You contribute cash or appreciated assets, take the full tax deduction that year, and then recommend grants to charities on your own schedule.

Why donors use them

• Timing.Deduct in a high-income year, grant the money out over the following years — the standard "bunching" strategy under today's large standard deduction.
• Appreciated assets. Contribute stock held over a year and you deduct fair market value while avoiding capital gains — the fund sells tax-free.
• Simplicity.One receipt for taxes, one dashboard for all grants; the sponsor handles the paperwork and verifies each charity's status.

The trade-offs

• Contributions are irrevocable — the money can only ever go to charity.
• Sponsors charge administrative fees (commonly ~0.6% a year, plus fund expenses).
• There is no legal deadline to grant the money out, which critics argue parks charitable dollars indefinitely. Set your own payout pace.

When you recommend a grant, the sponsor will ask for the charity's EIN — every profile on CharityIndex shows it, along with the financials worth checking before the money moves.

This is general information, not tax advice — deduction limits and DAF rules change, so confirm specifics with a tax professional before contributing.