Donor-Advised Funds Guide: Bunching and Giving Appreciated Stock

Most high earners give to charity every year, and most of them get little or no tax benefit for it. Since the standard deduction roughly doubled in 2018, a typical family that gives $10,000 or $15,000 a year and has a modest mortgage does not itemize, so the gift is generous but tax-neutral. Donor-advised funds solve that problem, and they solve a second one at the same time by turning appreciated stock into charitable dollars without a capital gains bill.

A DAF is a charitable account held at a sponsoring public charity. You contribute cash or assets, take the deduction in the year of the contribution, invest the balance, and then recommend grants to the charities you care about whenever you like. The money is irrevocably committed to charity, but the timing of the grants is up to you. That separation between when you deduct and when you give is what makes the strategy work.

This guide explains how donor-advised funds operate, how bunching works with real numbers, why appreciated securities are the right asset to give, and what changed for 2026. It is educational, not individualized advice.

How Donor-Advised Funds Work

A donor-advised fund is sponsored by a public charity. The largest sponsors are affiliated with national brokerage firms, and most community foundations, including the one serving metro Atlanta, run them as well. You open an account, name it whatever you like, and contribute. Minimums range from zero to $25,000 depending on the sponsor, and many have no minimum for additional gifts.

Once inside the fund, the money is invested in pools you select, typically index-based portfolios, and grows tax-free. You then recommend grants to any IRS-recognized public charity, usually online, in amounts as small as $50. The sponsor performs due diligence, confirms the charity's status using the IRS tax-exempt organization search, and sends the check. Grants can be made in your name or anonymously.

The sponsor charges an administrative fee, commonly around 0.6 percent of assets per year on the first several hundred thousand dollars and less above that, plus the expense ratios of the investment pools. Because you technically only advise the sponsor on grants, the sponsor has final legal control, but in practice recommendations to legitimate charities are honored. The IRS describes the structure on its donor-advised funds page.

The Charitable Deduction Rules for 2026

The tax benefit of a DAF contribution follows the ordinary rules for gifts to public charities. Cash gifts are deductible up to 60 percent of adjusted gross income. Gifts of appreciated long-term securities are deductible at full fair market value up to 30 percent of AGI. Amounts above those limits carry forward for up to five years. The details are in IRS Publication 526.

Two changes from the 2025 tax law apply starting in 2026. First, itemized charitable deductions are reduced by a floor equal to 0.5 percent of AGI. A household with $400,000 of AGI loses the first $2,000 of charitable deductions each year. Second, taxpayers in the 37 percent bracket receive a deduction benefit capped at 35 percent, which trims the value of all itemized deductions for the highest earners. Both changes reward concentrating gifts into fewer years, because the floor is applied once per year, not per gift.

The same law created a small deduction for non-itemizers who give cash, $1,000 for single filers and $2,000 for joint filers. That deduction does not apply to gifts to donor-advised funds, so it is a useful add-on for direct cash gifts in years you are not bunching, but it does not replace the DAF strategy.

Bunching Charitable Deductions With a Donor-Advised Fund

Bunching means giving several years' worth of donations in a single year so that your itemized deductions exceed the standard deduction, then taking the standard deduction in the off years. The DAF is what makes it practical, because you can front-load the deduction while still supporting charities on their normal annual schedule.

Consider a married couple in Atlanta with $14,000 of state and local taxes, $6,000 of mortgage interest, and $12,000 of annual giving. Their itemized total is $32,000, just under the $32,200 standard deduction for 2026. They take the standard deduction every year, and their $12,000 gift produces no tax benefit at all. Over three years they deduct $96,600.

Now suppose they contribute three years of gifts, $36,000, to a DAF in year one. Itemized deductions that year become $56,000. In years two and three they take the $32,200 standard deduction. Over three years they deduct $120,400, which is $23,800 more than before. In the 32 percent bracket that is roughly $7,600 of tax saved, and the charities still receive $12,000 every year because the couple recommends grants from the DAF on the same schedule as before.

When bunching pays off most

The benefit is largest for households whose other itemized deductions sit near the standard deduction, which describes many Georgia homeowners now that the SALT deduction cap is higher. It is also largest in a high-income year: a bonus, an equity vesting, a business sale, or a Roth conversion. Contributing to a DAF in that year offsets income taxed at your highest marginal rate. Our guide to the SALT cap and itemizing explains how the other deductions fit together.

Why Appreciated Stock Beats Cash

Giving cash is simple, but giving stock you have held for more than a year is usually better on every dimension. You deduct the full fair market value on the date of the gift, you never recognize the capital gain, and the charity, which is tax-exempt, sells the stock without paying tax either.

Suppose you bought $20,000 of an index fund years ago and it is worth $50,000 today. Selling it to give cash triggers $30,000 of long-term gain, which at a 23.8 percent combined federal rate plus Georgia tax costs about $8,600. Giving the shares directly to a DAF avoids that tax entirely and still produces a $50,000 deduction. If you want to keep the position, you can buy the fund back with the cash you would have donated, resetting your basis to $50,000 at no cost. There is no wash sale rule for gains.

The strategy is especially useful for people holding concentrated employer stock, RSUs that vested long ago, or a legacy position with a very low basis. Giving the most appreciated lots first, which requires specifying lots with your custodian, gets the most benefit per share. Our overview of charitable giving tax strategies walks through lot selection and the paperwork.

Assets to avoid giving and paperwork to expect

Stock held one year or less is deductible only at cost basis, so it is a poor gift. Stock with a loss should be sold first, so you can harvest the loss, and then the cash donated. Non-cash gifts over $500 require Form 8283, and gifts of assets other than publicly traded securities worth more than $5,000, such as private company shares or real estate, require a qualified appraisal. Many sponsors accept complex assets, but allow several weeks for the transfer and complete it before December 31.

What a Donor-Advised Fund Cannot Do

The flexibility of a DAF has limits, and a few of them surprise new donors.

• It cannot receive a qualified charitable distribution from an IRA. Donors over 70 and a half who want to give from an IRA must send the money directly to an operating charity.
• It cannot make grants to individuals, provide scholarships you control, or fund political activity.
• It cannot be used to pay for anything that gives you a personal benefit, such as gala tickets, auction items, or membership perks with more than token value.
• It generally should not be used to satisfy a legally binding personal pledge, although the IRS has signaled some tolerance when the charity does not treat the grant as fulfilling the pledge. Make pledges non-binding or phrase them as intentions.
• It cannot grant to private non-operating foundations or to most foreign charities directly.
• Once contributed, the money cannot come back to you for any reason.

Donor-Advised Fund vs Private Foundation

Families with large charitable intentions sometimes weigh a private foundation instead. A foundation offers more control, the ability to employ family members, and the option to make grants to individuals and run programs directly. It also comes with annual excise tax on investment income, a required 5 percent annual payout, public disclosure of every grant, legal and accounting costs, and lower deduction limits: 30 percent of AGI for cash and 20 percent for appreciated securities, with gifts of non-public stock deductible only at basis.

For most families giving less than a few million dollars, a DAF delivers nearly all the benefits with none of the overhead. Some families use both, giving to the foundation for program work and to a DAF for anonymous or simpler grants. A DAF can also name successor advisers, usually children, which makes it a practical vehicle for teaching the next generation about giving. That fits naturally with the legacy conversations our estate and legacy planning service supports, in coordination with your estate attorney.

Setting Up and Using a DAF Well

The mechanics are simple, but a few habits make the strategy more effective.

• Open the account before you need it. Transfers of securities can take one to three weeks, and December is the busiest month.
• Fund it in high-income years and grant from it in every year, so the charities you support see no gap.
• Give the lots with the lowest cost basis first, and ask your custodian to confirm the lot identification in writing.
• Keep the investment allocation consistent with your grant timeline. Money you will grant within a year belongs in a conservative pool.
• Name successor advisers and a default charitable beneficiary so the fund does not sit idle if something happens to you.
• Coordinate DAF contributions with Roth conversions, capital gain harvesting, and estimated tax payments in the same year, since they all interact through your adjusted gross income.

A donor-advised fund does not make you more generous. It makes the generosity you already practice count for more by matching the deduction to the years it does the most good and by letting appreciated assets do the giving. For households that have crossed into higher brackets, hold appreciated positions, or expect a large income event, it is one of the more useful accounts available. Our tax planning service builds charitable timing into the annual plan alongside everything else that moves your taxable income.

Tony Colunga · Founder, Attend Wealth

Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, physicians, and business owners. Advisory services are held to a fiduciary standard. More about Attend