Your company went public, the stock ran, and now a big chunk of your net worth is sitting in one ticker with a cost basis somewhere near zero. You want to give some of it away: to your alma mater, your church, the food bank, whatever you care about. So you sell some shares and write a check.
That's the move that costs you.
When you sell appreciated stock to fund a gift, you hand the IRS its cut of the gain first, then donate what's left. There's a tool that lets you skip that step entirely: give the stock itself, deduct the full market value, and never pay tax on the appreciation. It's called a donor advised fund, and for someone holding a concentrated, low-basis position, it's one of the cleanest moves in the playbook.
Here's how it works, where it fits, and the 2026 tax law change that every charitably minded person needs to know.
Who This Is For
A DAF makes giving cheaper, not free. If you weren't going to give the money away anyway, selling the shares and paying the tax leaves you with far more than donating them and taking the deduction. This is a tool for people who already intend to give. It makes that giving go further; it doesn't turn charity into a tax play.
What a Donor Advised Fund Is
A donor advised fund (DAF) is an investment account that exists for one purpose: charitable giving. You open one through a sponsoring organization (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or a community foundation) and the mechanics run in three steps.
You contribute. You move assets into the DAF. The moment you do, the gift is irrevocable: the assets are no longer yours, and you get an immediate tax deduction for the contribution.
The fund invests. The sponsoring organization sells whatever you contributed and reinvests the proceeds in a portfolio you choose. Because the sponsor is a 501(c)(3) public charity, that sale triggers no capital gains tax: not for you, not for the charity. The money then grows tax-free inside the account.
You recommend grants. When you're ready to give, you recommend a grant to a specific charity. The sponsor confirms the organization is a qualified public charity and that you're not getting anything in return, then cuts the check. You can grant any amount, at any frequency, to as many charities as you want: this year, next year, or a decade from now.
The deduction and the giving are decoupled. You take the tax benefit the year you fund the account, then dole out the actual gifts on whatever timeline you like. That gap between "deduct now" and "give later" is where most of the strategy lives.
The Real Move: Give the Stock, Not the Proceeds
Cash works in a DAF. But cash is the boring use case, and it's not why someone with equity comp should care.
The move that matters is contributing appreciated stock you've held for more than a year. When you do, two things happen at once. You deduct the full fair market value of the shares: not your basis, the current value. And you completely sidestep the capital gains tax you'd owe if you sold those shares yourself.
Run the comparison. Say you're holding shares now worth $100,000, with a cost basis of $10,000: a $90,000 long-term gain baked in.
If you sell, then donate the cash: At a 23.8% federal long-term rate (the 20% top bracket plus the 3.8% net investment income tax that high earners hit), the $90,000 gain costs you about $21,400 in tax. Add a high-tax state (California, New York) and you're well past $30,000 gone before the charity sees a dime. You donate what's left and deduct that amount.
If you donate the shares directly to a DAF: No sale on your end, so no capital gains tax. You deduct the full $100,000. The charity gets the full value. The IRS gets nothing.
Same out-of-pocket cost to you either way. But one version hands the charity the full $100,000 and the other hands it about $78,600, with the difference going to tax. For a concentrated, low-basis position, the gap only widens. The lower your basis, the bigger the embedded gain you get to skip.
This is the part most people miss, and it's exactly the kind of thing that should be coordinated with the rest of your equity picture (which shares to give, which to hold, which to sell outright) rather than decided in isolation the week before year-end.
What You Can Contribute
DAFs accept a wider range of assets than most people expect:
Cash
Publicly traded stock, ETFs, and mutual funds
Cryptocurrency
Pre-IPO and privately held shares (S-corp and C-corp stock)
Private equity and hedge fund interests
The publicly traded shares are the easy case: transfer them in, done. The interesting one for pre-liquidity employees is private stock. If you're holding founder shares or early-exercised options in a company that's heading toward an exit, contributing some of that stock to a DAF before the sale closes can lock in a deduction and erase the gain on the donated portion.
The catch: gifts of private stock require a qualified appraisal, and the timing has to be handled carefully: the contribution needs to happen before any binding sale agreement, or the IRS treats it as if you sold the stock and donated cash (which puts the gain right back on your return). This is not a DIY-the-week-before-closing move. It's a plan-it-six-months-out move. (For the related pre-IPO tax play that pairs well with this, see our QSBS exclusion guide.)
The 2026 Math Changed, and It Favors This Strategy
The One Big Beautiful Bill Act rewrote a few charitable-giving rules starting in 2026, and the changes cut in an interesting direction for high earners. Two matter here.
There's now a 0.5%-of-AGI floor on charitable deductions. If you itemize, you can only deduct charitable contributions to the extent they exceed half a percent of your adjusted gross income. On $600,000 of AGI, the first $3,000 of giving does nothing for you. And it doesn't carry forward the way a contribution over the AGI ceilings does: unless your giving is large enough to be capped by one of those limits too, the floored amount is permanently gone.
Top-bracket earners get their deductions valued at 35%, not 37%. If you're in the 37% bracket, your itemized deductions, charitable gifts included, are now capped at a 35% benefit. A modest haircut, but a real one.
The two changes don't point the same direction, and it's worth being precise about which does what.
The floor is a real new argument for concentrating your giving, because it's charged once a year whatever the size of the gift. On $600,000 of AGI, giving $20,000 a year for five years absorbs the $3,000 floor five times and loses $15,000 of deduction. The same $100,000 given in a single year absorbs it once and loses $3,000.
The 35% cap cuts the other way. Timing a deduction into your top-bracket year used to be worth 37 cents on the dollar against 32 in an ordinary year. Now it's 35 against 32. Still worth doing, just less than it was.
The Bunching Play
Bunching means taking several years' worth of charitable giving and compressing it into a single year: funding a DAF with one large contribution, then granting it out gradually over the years that follow.
Why bother? Two reasons. The first has been true for years; the second is new in 2026.
First, the standard deduction is high: $32,200 for a married couple in 2026. If your normal annual giving plus your other itemized deductions don't clear that bar, you get no tax benefit from giving at all; you're taking the standard deduction anyway. Bunch five years of gifts into one year and you clear it, itemize, then take the standard deduction in the four "off" years.
Second, the 0.5% floor, as above: one contribution absorbs it once instead of five times.
Be precise about what that buys, though. If your other itemized deductions come to $27,000 against a $32,200 standard deduction, the first $5,200 of the gift only replaces the deduction you would have taken anyway. Add the $3,000 floor and $8,200 of a $100,000 bunch earns you nothing incremental. The other $91,800 does.
One ceiling to plan around: gifts of appreciated stock are deductible up to 30% of your AGI in a given year, against 60% for cash. Anything above that carries forward for up to five years, so an oversized bunch isn't lost, but it isn't all deductible the year you make it either. That constraint is what decides how big a single bunch should be.
The timing lever makes this sharper if your income is lumpy. Bunch in the year you need the deduction most: the year your RSUs vest in a lump, the year your company gets acquired, the year a secondary sale spikes your income. That's the year a six-figure deduction is worth the most to you, and it's the year you're most likely to have a slug of appreciated stock to fund it with. The deduction lands when your income is high; the giving happens calmly over the following decade.
You're not giving more. You're giving the same total, sequenced to do the most work.
Where the DAF Fits the Bigger Picture
A DAF is one instrument that, used well, touches three other parts of your financial life at once.
Concentrated position cleanup. If too much of your net worth is locked in one company's stock, a DAF is a way to trim the position without paying the gains toll on the donated shares. You were going to give anyway; this lets the giving double as de-risking.
Estate planning, mostly as a footnote. The old pitch for DAFs leaned on estate tax avoidance. Under OBBBA the federal exemption is $15 million per person, $30 million for a married couple, so for most people holding concentrated equity that pitch no longer lands and a DAF is an income-tax tool. Above those thresholds the planning usually runs through charitable trusts and foundations rather than a DAF anyway, though a state estate tax in places like Massachusetts or Oregon can bite at far lower numbers.
Legacy. You can name your kids or anyone else as successor advisors, so the fund keeps giving after you're gone, on their recommendations. Or name a charity to receive whatever's left. It's a way to turn one decision today into a giving vehicle that outlives you, without the cost and overhead of a private foundation.
None of these moves happens in a vacuum. Which shares to give, which year to bunch, how the deduction interacts with an AMT year or a Roth conversion you were planning: that's the coordination work that sits behind the obvious "should I open a DAF" question. The DAF is the easy part. Knowing when and how to pull the trigger against everything else happening in your financial life is the part worth getting right. (That coordination is most of what we actually do: more on that on our How We Work page.)
When a Donor Advised Fund Isn't the Answer
DAFs aren't for everyone, and a few situations are a poor fit.
You're giving modest amounts of cash. If your giving is a few thousand dollars a year in cash and you don't have appreciated assets to contribute, the machinery isn't worth it: just give directly and, if you don't itemize, take advantage of the new above-the-line deduction for cash gifts ($1,000 single, $2,000 married) that OBBBA added for non-itemizers.
You want to give to something that isn't a qualified public charity. DAFs can only grant to verified 501(c)(3) public charities. Giving to an individual, a political campaign, or your friend's GoFundMe is off the table.
You need the money back. Worth repeating, because people forget it: the contribution is irrevocable. Once it's in, it's gone: it can only ever go to charity. Don't fund a DAF with money you might need.
You want maximum control and a giving entity with real teeth. If you're giving at a scale where you want to employ family, hold board meetings, and make grants to individuals or run your own programs, that's private foundation territory, not a DAF. Most people don't need that. A few do.
The Honest Version
A donor advised fund doesn't make you more charitable. It makes the giving you were already going to do more efficient, and for someone sitting on a pile of low-basis company stock, the efficiency gap between "donate the shares" and "sell and write a check" is large enough to notice.
The mechanics are simple. The judgment calls (which shares, which year, how it fits against everything else on your tax return) are not. That's the difference between knowing the tool exists and using it well.