What is a Donor-Advised Fund (DAF)?
A donor-advised fund (DAF) is a charitable giving account that exists solely to support charitable organizations you care about. Using a charitable gift fund system like the donor-advised fund lets you put assets in a sponsoring organization and then get a tax deduction (via the Internal Revenue Code) while making grant recommendations over time.
Tax-exempt DAFs are a rapidly growing charitable giving vehicle and offer an alternative to the traditional way of charitable giving. That’s because they afford immediate tax benefits, your gifts compound without tax erosion from capital gains and dividends, and all of your charitable gifts are centralized in one place. Tax regulations aside, DAFs also offer the tax advantage of investing advocated contributions and growing them over time before donation to selected nonprofits. More than $54.77 billion in grants to charities was made via donor-advised funds in 2023 across the country, according to the National Philanthropic Trust.
GoFundMe Giving Funds provides added flexibility to support nonprofit organizations. With a simple fundraising page and no fees in setting up your DAF account, it’s built to make an impact on the causes you care about most.
How a donor-advised fund works
1. Make a tax-deductible donation
Create a GoFundMe Giving Funds account, donate cash or non-cash assets like stocks or illiquid assets such as real estate (coming soon), and get an immediate tax deduction.
2. Grow your donation, tax-free
While you’re deciding which charities and causes to support, your fund can continue to grow, increasing the amount available to donate when you’re ready.
3. Support charities you love, now or over time
You have advisory privileges to recommend grants from the fund to your favorite qualified charities, now or over time, whether that’s your local food bank or an organization with international impact. Support charities you love at a pace that is comfortable for you.
Benefits of a donor-advised fund
A donor-advised fund has several benefits that simplify and amplify charitable giving. Here are some key benefits:
- Tax-deductible: receive an income tax deduction when you make a contribution, in line with federal tax guidelines.
- Tax-free growth: invested funds can grow tax-free, potentially increasing the amount available for grants.
- Flexibility in grant timing: recommend grants to your chosen charities at any time, allowing for strategic philanthropic planning.
- Simplified record-keeping: consolidate your charitable giving into one account, simplifying tax reporting and record-keeping.
Tax implications of a DAF
One of the main advantages of a DAF is that you can receive a tax deduction for making a charitable contribution.
- Cash donations: deductible up to 60% of adjusted gross income (AGI).
- Appreciated assets (e.g., stocks or real estate): deductible up to 30% of AGI, with the added benefit of avoiding capital gains tax.
- Carry-forward benefits: if a donation exceeds deduction limits, the excess can be carried forward for up to five years.
When assets are contributed to a donor-advised fund, they can be invested and grow, tax-free, spurring larger charitable impact over time. This capacity for growth could make it possible for donors to donate amounts that exceed their original contribution.
Are donor-advised funds tax loopholes?
Donor-advised funds can feel like a convenient tax loophole, but under the Internal Revenue Code, they are heavily regulated to ensure that every cent is spent in support of charitable purposes, in some manner. And those contributed funds cannot be taken for personal gain, so it’s actually a really good way to keep everyone operating ethically and transparently, as due diligence checks continue.
How to support charities
A donor-advised fund allows you to personalize how and when you give to charities and causes you care about most.
With a DAF, you can:
✔ Recommend grants to IRS-qualified public charities – you can support eligible 501(c)(3) nonprofit organizations, as well as churches, public schools, and universities.
✔ Give anonymously or publicly – choose whether to share your name with the recipient organization or keep your donation private.
✔ Support multiple charities – instead of managing multiple donations separately, you can consolidate your giving into one account and distribute grants to various charities and causes over time.
✔ Set up recurring grants – automate donations to your favorite charities on a monthly, quarterly, or annual basis.
✔ Donate in response to emergencies – quickly support charities providing disaster relief, crisis response, and urgent needs as they arise.
✔ Plan your charitable legacy – name a successor advisor to continue granting funds to charities in your name indefinitely.
With a donor-advised fund, you can’t:
❌ Make grants to individuals – funds must be directed to IRS-qualified charities, not directly to individuals, including friends, family members, or those in need.
❌ Pay for memberships, event tickets, or benefits – you can’t use DAF funds to purchase items, memberships, or event tickets where you receive something of value in return.
❌ Fulfill a pledge – while you can recommend a grant to a charity you pledged to support, you cannot explicitly use a DAF to satisfy a legally binding pledge.
❌ Support political campaigns or lobbying efforts – DAF funds cannot be used to contribute to political candidates, campaigns, or organizations that engage in lobbying.
❌ Withdraw funds for personal use – DAF funds are irrevocable contributions, meaning they cannot be taken back or redirected for non-charitable purposes.
A donor-advised fund helps you maximize your giving while ensuring compliance with charitable giving rules. By understanding these guidelines, you can make an even bigger impact on the causes and philanthropic goals that matter most to you.
How donor-advised funds compare to charitable trusts and private foundations
Donor-advised funds offer a structured and flexible alternative to traditional giving methods. Here’s how they compare:le alternative to traditional giving methods. Here’s how they compare:
| Donor-Advised Funds | Private Foundations | Direct Donations | Crowdfunding | |
| Setup & costs | Low administrative burden, no setup costs | High administrative costs, requires legal setup | No setup required | Easy to start – usually free for fundraisers |
| Tax benefits | Immediate deduction, tax-free investment growth | Lower tax deduction limits, subject to excise tax | Deductible in the year given, no growth potential | Donations are generally not tax-deductible unless given to a registered nonprofit |
| Control & flexibility | Grants made over time, funds can grow tax-free | Full control over grantmaking but with high regulatory burden | One-time donation with no long-term planning | Direct, immediate support to individuals, causes, and nonprofits |
| Governance | Managed by sponsor organization | Requires board, legal compliance | No management needed | Platform-managed, but donors choose who to support |
A lot of donors choose DAFs over direct cash donations due to their tax efficiency, ability to plan giving, and potential for investment options and growth.
Some organizations, including universities and community foundations, also have tailored donor-advised funds (like MIT’s DAF) that blend traditional giving with educational or research-related initiatives. These accounts frequently attract donors who want to donate to higher education, innovation, or the arts while benefiting from the same immediate tax benefits and investment strategy flexibility as a typical DAF.
Donor perspective: real-life DAF users
Giving should be simple, meaningful, and impactful. Here’s how our donors use a donor-advised fund to make a difference:
Planning for the future
Rather than just a charitable tool for today, the donor-advised fund can also be part of your legacy plan.
And because multiple advisors can be added to an account, the DAF lets family members work together in charitable giving or for business partners to corral all their donations in one place. This shared framework can also go a long way toward aligning charitable priorities among generations or a group of peers.
Whether you want to ensure your favorite charities and causes continue receiving support, involve your family in philanthropy, or establish a lasting impact beyond your lifetime, a DAF offers flexible options for legacy planning.
With a donor-advised fund, you can:
- Pass down your philanthropic values – a DAF allows you to teach your children or loved ones the importance of giving and create a family tradition of charitable support.
- Continue giving after you’re gone – your DAF can be structured to continue making grants to charities long after your lifetime.
- Reduce estate taxes – since funds contributed to a DAF are designated for charitable purposes, they are not subject to estate taxes, potentially reducing the tax burden on your heirs.
- Make a lasting impact – by setting up an endowed giving plan, your fund can continue supporting nonprofits and their beneficiaries.
Why choose GoFundMe Giving Funds?
Not all donor-advised funds are the same. Our Giving Funds stand out by making philanthropy more personal, flexible, and impactful.
- Seamless giving experience – manage all your charitable donations in one place with an easy-to-use platform.
- No minimum requirements – GoFundMe Giving Funds are accessible to everyone; there is no minimum amount to open an account, and contributions can begin as low as $5.
- Flexibility in charitable giving – support nonprofits and crisis relief efforts, all from one account.
Ready to start giving with confidence? Open your Giving Fund account now and start making a difference.
This content is for educational purposes only and does not constitute tax, legal, or investment advice. Any financial or tax-related calculations provided are illustrative examples only and should not be relied upon for making financial decisions.
Laws and regulations regarding donor-advised funds vary, and tax benefits depend on individual circumstances. Readers should consult with a qualified tax, legal, or financial professional for personalized guidance.