Step-by-step · 3 min read
Donor-advised funds
A donor-advised fund lets you take a deduction this year and recommend grants to charities over time. Funding it with appreciated stock avoids capital gains tax as well.
It is especially useful in a year with unusually high income, such as a big vest, an IPO or a sale, when each dollar of deduction saves the most.
- Who it fits
- People who give regularly, especially in a high-income or big RSU year.
- Figures
- 2026 tax year
The key rule
A deduction in the year you fund it. Gifts of stock held more than a year are deducted at market value, with no tax on the gain.
5 steps
Pick a sponsor
Fidelity Charitable, Schwab Charitable and Vanguard Charitable are common. Minimums and fees vary.
Choose what to give
Your most appreciated long-term shares are usually best. Shares at a loss should be sold, and the cash given instead.
Bunch your giving
Several years of gifts in one year can lift you above the standard deduction, with the standard deduction taken in the other years.
Know the limits
Gifts of stock are deductible up to 30% of adjusted gross income, and cash up to 60%. Excess carries forward five years.
Recommend grants over time
Grants can go to almost any US charity whenever you like.
Example
Giving appreciated shares
You plan to give $10,000 a year for five years. Instead, in a high-income year, you give $50,000 of shares you bought for $15,000. You deduct $50,000, avoid tax on the $35,000 gain, and grant $10,000 a year from the fund.
Common mistakes
- From 2026, itemized charitable deductions only count above 0.5% of your adjusted gross income, and the benefit is capped at 35% for those in the top bracket.
- Grants cannot pay for event tickets or pledges that benefit you.
Key dates
- December 31
- Stock must arrive in the fund to count this year; transfers can take a week.
Questions we hear
How quickly do I have to grant the money?
There is no required timeline, though many sponsors ask for some activity every few years.
Can the fund pay my pledge to a charity?
No. Grants cannot satisfy a legally binding personal pledge or buy tickets or benefits for you.
What about non-itemizers?
From 2026, people who take the standard deduction can deduct up to $1,000 ($2,000 joint) of cash gifts to public charities, but not gifts to donor-advised funds.
What to send us
- Contribution receipt from the fund
- Details of shares given
Upload them to your client portal.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.