A surge in charitable giving through donor-advised funds (DAFs) has been observed, driven by a combination of strong stock market performance and impending tax reforms. This trend, as reported by DAFgiving360, one of the largest DAF administrators, saw donors grant a record-breaking $9.9 billion to charities in 2025, an impressive 28% increase from the previous year.
DAFs offer donors the flexibility to contribute cash or assets, providing an immediate tax deduction, and allowing them to decide later how to distribute their gifts to charities. For those with appreciated assets or non-cash holdings, DAFs present a tax-efficient way to donate, avoiding capital gains tax.
Julie Sunwoo, president of DAFgiving360, highlighted that 74% of contributions last year were made in the form of non-cash assets, including ETFs, index funds, real estate, and even cryptocurrency. She emphasized the role of DAFs in helping donors manage complex assets and develop a thoughtful plan for charitable giving.
The surge in DAF contributions is largely attributed to the passage of President Donald Trump's One Big Beautiful Bill Act in July 2025, which reduced tax benefits for high-income donors starting in 2026. Wealthy individuals and their advisors rushed to maximize tax benefits before the changes took effect, leading to a significant increase in charitable giving.
The effective tax benefit of charitable giving for top earners has been reduced from 37% to 35%, and the Indiana University Lilly Family School of Philanthropy estimates that this cap alone will result in a decrease in giving of $4.1 billion to $6.1 billion annually.
Additionally, the bill limited tax incentives for itemizers, allowing them to deduct donations only in excess of 0.5% of their adjusted gross income. This means that a taxpayer with $2 million in income would receive no tax benefit for the first $10,000 of their annual giving.
Tax planner David Perez advised clients to fund their DAFs with 3 to 5 years' worth of contributions before the tax changes, allowing them to spread out their donations to charities over several years. He expects the tax law changes to encourage more strategic and planned giving, moving away from spontaneous checkbook philanthropy.
Perez highlighted that DAFs cannot be used for certain charitable activities, such as buying tickets to galas or events, which would be partially deductible if purchased directly from the charity. While DAFs offer convenience, recommending grants from a DAF requires more time and effort compared to writing a check.
"If donors want to do it the right way, through their DAF, they now have to consider the additional steps involved. It might make them think twice about the process," Perez said.
This shift towards more deliberate and planned charitable giving through DAFs raises interesting questions about the future of philanthropy and the role of tax incentives in shaping donation patterns. What are your thoughts on this evolving landscape of charitable giving? Feel free to share your opinions and insights in the comments below!
