Donor-advised funds: A smart way to give

Next, choose which charities to support, how often to give and how much.

You can direct the money to any IRS-approved charitable organization.

Tax deductions

The standard deduction was raised in 2025 and has now been indefinitely extended.

Taking the standard deduction: A new provision in 2026 lets you deduct up to $1,000 in charitable cash contributions ($2,000 if filing jointly) made directly to qualified charitable organizations. However, contributions to DAFs are specifically excluded. You can still receive other DAF advantages, including tax-free growth and capital gains avoidance, just not a deduction for the DAF contribution itself.

Itemizing deductions: A new 2026 rule limits what’s deductible: only aggregate charitable contributions exceeding 0.5% of your adjusted gross income (AGI) are deductible. If you don’t give enough in a single year to clear that floor, a DAF’s “bunching” strategy may be effective. You combine several years of giving into one DAF contribution and distribute funds at your own pace, making the 0.5% AGI floor easier to clear.

In the 37% federal marginal tax bracket: Your itemized deduction tax benefit is now capped at 35%, applied after any other deduction-specific limits such as the 0.5% AGI floor. Factor this into your charitable giving strategy with your tax professional.

Tax-free growth of earnings

Once you contribute an asset to a DAF, any earnings growth is not taxable to you, the DAF or recipient charities. This means charitable assets can grow, potentially increasing what recipient organizations receive.

Avoidance of capital gains taxes

When you donate appreciated stocks or other investments — or virtually any appreciated asset — to a DAF, you can avoid the capital gains taxes that would be due if you sold the asset and donated the proceeds. Charities benefit because they receive the full appreciated value rather than after-tax sale proceeds. And you can still take a tax deduction for your donation.

Trade-offs to consider

While these tax benefits can make a DAF attractive, it’s worth understanding the trade offs. Once you contribute assets to a DAF, that gift is irrevocable. Your investment options are also limited to what’s available in the DAF program you’ve chosen, and DAFs can incur administrative costs in addition to fees charged on the underlying investments.

A good next step

Because DAFs can have significant implications for your tax situation, consult with your tax professional before taking action. Your financial advisor can also help you evaluate DAF benefits and trade offs and compare sponsors, since programs offer different features.

If a DAF is appropriate, it can be a meaningful and efficient way to support charitable giving for years to come.

This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Edward Jones, Member SIPC.

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.