Giving money directly to a favorite charity isn't the only way U.S. taxpayers can receive an annual deduction for their donations. They can also set up an account called a donor-advised fund (DAF).

According to the IRS, a donor-advised fund is a special fund or account controlled by a section 501(c)(3) organization called a sponsoring organization. Many people set up DAFs through community foundations. (The Council on Foundations' Community Foundation Locator can help you find community foundations in your area.) Sponsoring organizations can also be public charities--such as some university alumni associations--and investment firms that manage charitable funds. Schwab and Fidelity are among the big financial services companies that manage huge sums of money in DAFs.

Briefly, an individual donor contributes a certain amount of assets -- it could be cash, stock shares or some other kind of wealth -- to a fund. Donors can deduct the full amount right away from that year's taxes. They can't get the funds back; all of it must eventually go to nonprofits, but there's no time limit. Meanwhile, the funds can be invested and continue to grow. Some donors want to pick which organizations receive grants from their DAFs. Other donors prefer to let the fund managers decide.

Increasingly, individual donors are choosing to contribute to donor-advised funds, because they can advise how funds are invested and distributed but avoid the administrative requirements and operating costs involved with running a private foundation. According to the National Philanthropic Trust, in 2022 DAFs made an estimated $52.16 billion in grants to nonprofits, a 9 percent increase in giving over the previous year.

Unlike private foundations, donor-advised funds do not have minimum payout requirements, but lawmakers are considering making similar payout rules for them.

Also, these funds can be relatively anonymous because, unlike foundations, they are not required to disclose as much information about their charitable giving. This means that finding detailed, public information about a donor-advised fund's grantmaking activities can be challenging for grantseekers and researchers. However, according to the The 2024 National Study on Donor Advised Funds by the DAF Research Collaborative, "less than 4% of grant transactions were made anonymously, indicating that the vast majority of grant transactions are distributed with fund and/or donor information."

Foundation Directory, our searchable database of grantmakers, can also help you find sponsoring organizations. Try an Organization Type search for "Donor-advised funds (grantmaker)." You can subscribe online, or use it for free at our Candid partner locations. Eligible nonprofits with revenue or expenses under $1M can also gain a free year of access to Foundation Directory Essential through our Go for Gold! promotion.

How can my nonprofit find and solicit DAFs?

Aside from community foundations, most DAF managers don't offer any easy way for a nonprofit to introduce itself to a DAF or its customers. Some good ideas are to:

  • Make it clear on your donations page that you accept donations from DAFs.
  • Make it clear in your gift acknowledgement letters as well.
  • Visit the DAF Direct site to learn more about the DAF direct widget.

For more creative ideas to connect with DAFs, check out our blog post, The ABCs of DAFs: How to tap into donor-advised funds.

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