Donor-Advised Fund.

In plain English

A donor-advised fund (DAF) is an account you open at a sponsoring charity, such as a community foundation or a fund run by a brokerage. You put money or assets in, claim the charitable deduction in that tax year, and the money grows tax-free inside the account. Over time you recommend which qualified charities receive grants from the balance. The sponsor technically owns the funds and has final say, but in practice it follows your recommendations as long as the recipient is a legitimate charity.

01Why it matters

A donor-advised fund lets you lock in a tax deduction in a high-income year while spreading the actual giving out over many years, which is useful if you have a big windfall but have not decided which charities to support.

02The math, step by step

Imagine you sell some stock and have an unusually high-income year. You put $20,000 into a donor-advised fund in that year and claim the deduction now, while you are in a higher tax bracket. Over the next five years you recommend $4,000 grants to your local food bank and your school. You got the full deduction up front, but the charities receive the money gradually. Donating appreciated stock directly can also let you skip the capital gains tax on the growth.

03What this is NOT

04Receipts

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