Making Your Charitable Dollars Work Harder
Posted on December 2, 2025
Below, we explore how year-end giving, especially through donor-advised funds, intersect with these new tax laws.
DAFs: A Modern Tool for Holiday Giving
A DAF is an investment account dedicated to charitable giving, managed by a sponsoring organization. While DAFs have existed for decades, their popularity has surged in recent years as donors look for streamlined, tax-efficient ways to give, especially during year-end when tax planning and charitable intentions naturally intersect.
DAFs can be funded with cash, marketable securities, or even nontraditional assets such as artwork, antiques, or privately held business interests. Donors receive an immediate tax deduction for the value of assets placed into the fund, even if the actual grants to charities are made later. This makes DAFs especially powerful for December planning. You can secure the tax benefit now and decide on the specific gifts after the holidays, once you’ve had time to reflect on your philanthropic goals.
Although DAFs must be custodied with a sponsoring organization such as a public charity or community foundation, often donors may continue working with their existing financial advisor to manage the investments within the DAF, allowing for continuity and strategy across their broader financial and charitable picture
Why 2025 Matters: The Big Beautiful Bill and the Coming Tax-Law Shift
The OBBBA introduces both enhancements and limitations for charitable contributors. Several positive provisions, such as making the 60% AGI limit for cash gifts to public charities permanent, take effect immediately. But the more restrictive changes do not begin until January 1, 2026, creating a one-year planning window.
Beginning in 2026, new tax rules will significantly reduce the value of charitable deductions. First, taxpayers may deduct only the portion of their charitable gifts that exceed 0.5% of their adjusted gross income. Second, high-income earners will see all itemized deductions, including charitable contributions, capped at an effective 35% tax benefit.
Given that these limits do not begin until 2026, 2025 offers a unique opportunity for donors to “front-load” their giving and take full advantage of current rules. This includes full marginal deductibility, no AGI floor, the ability to exceed AGI limits with five-year carry forwards, and higher overall tax benefits per donated dollar. Thus, utilizing a front-loading strategy allows donors to lock in favorable deductions now while distributing charitable funds over time.
Why DAFs Fit Perfectly into Year-End Strategy
While holiday giving is top of mind, DAFs offer several advantages:
- Immediate Tax Benefits, Flexible Timing
Contribute before December 31 and receive a deduction this year, even if you decide where the funds go in January or beyond.
- A Way to “Bundle” Charitable Donations
For donors seeking to exceed the standard deduction threshold, DAFs offer a way to “front-load” several years of charitable giving into a single contribution. This can be especially effective over years with unusually high income or capital gains.
- Efficiency When Donating Appreciated or Illiquid Assets
The holidays often inspire housecleaning, portfolio rebalancing, and assessing accumulated assets. DAFs can accept gifts of appreciated securities or hard-to-donate items that, once monetized, can significantly increase the value of charitable contributions.
- Strategic Giving Throughout the Year
Once assets are in a DAF, they can grow tax-free, positioning donors to support charities not just in December, but throughout the coming year or even across multiple generations.
DAFs vs. Private Charitable Foundations
Both donor-advised funds and private charitable foundations (PCFs) help families support nonprofits and build charitable legacies. However, they differ in complexity and cost, differences that matter when you’re trying to make year-end giving both meaningful and efficient.
DAFs offer:
- Lower administrative burden: No need to maintain governance documents or file annual federal tax returns.
- Faster setup: Often completed within days, ideal for year-end deadlines.
- Greater privacy: Unlike PCFs, which must publicly disclose certain information, DAF grants can be anonymous.
- More tax efficiency: No mandatory 5% distribution requirement and no excise taxes on investment income.
While private foundations offer donors full control over distributions and grantmaking, they require greater administrative oversight. Many families who once considered a foundation now find DAFs a simpler alternative, especially when a December 31 deadline is looming.
Control, Succession, and Legacy
Contributions to a DAF are irrevocable, and donors retain advisory privileges rather than direct authority. The sponsoring organization must approve grants, though in practice most recommendations that meet IRS criteria are accepted.
However, DAFs can be structured with enduring impact in mind. Many sponsoring organizations allow donors to:
- Name successor advisors (often children or grandchildren)
- Establish legacy giving plans that take effect after their lifetime
- Create multi-generational philanthropic traditions similar to those of private foundations
In many cases, existing private foundations can even be converted into DAFs, allowing families to simplify administration while sustaining a long-term charitable vision.
Holiday Giving with Purpose
For individuals and families interested in maximizing their charitable impact, and making gifting more meaningful this holiday season, DAFs are a powerful tool; as 2025 draws to a close, this season offers not only a chance to celebrate generosity but also a rare opportunity to maximize the impact of your giving before new rules begin in 2026.
By making gifts before year-end, you can capture today’s more favorable tax benefits while supporting the causes that matter most. To make the most of this moment, consider speaking with a financial advisor or tax professional who can help you align your charitable goals with your broader plans. If you’re ready to turn your year-end generosity into lasting impact, now is a great time to consider donor-advised funds.
At Florida Trust Wealth Management, we’re committed to helping you make your generosity count. Reach out to us to discover how you can maximize your giving this season and beyond. www.floridatrust.com
LEGAL, INVESTMENT AND TAX NOTICE: This information is not intended to be and should not be treated as legal advice, investment advice or tax advice. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel.
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