What Are the DAF Contribution Limits?

A Donor-Advised Fund, or DAF, is a financial account for charitable giving. An individual opens an account with a public charity that sponsors a DAF program, making an irrevocable contribution of cash or other assets. This contribution makes the donor eligible for an immediate tax deduction, and the funds can then be invested to grow tax-free.

Over time, the donor can recommend grants from the DAF to qualified public charities. This structure separates the timing of the tax deduction from the actual distribution of funds to the charities. It provides a centralized way to manage giving without the administrative burden of a private foundation, as the sponsoring organization handles record-keeping and due diligence for each grant.

Annual Deduction Limits for Contributions

Tax deductions for contributions to a DAF are subject to annual limits from the Internal Revenue Service, based on a percentage of the donor’s Adjusted Gross Income (AGI). For cash contributions, a donor can deduct an amount up to 60% of their AGI for that tax year. This limit applies to contributions made to public charities, including DAF sponsoring organizations.

A different limit applies to contributions of non-cash assets, such as stocks, bonds, or mutual funds held for more than one year, referred to as long-term appreciated assets. The deduction for these assets is limited to 30% of the donor’s AGI. This is a consideration for individuals who fund their DAF with appreciated securities to avoid capital gains tax on the sale of those assets.

If a donor’s contribution exceeds their AGI limits in a single year, the tax benefit is not lost. The IRS permits the excess deduction amount to be carried forward for up to five subsequent tax years. For example, if a donor with an AGI of $200,000 contributes $150,000 in cash, their deduction for the current year is capped at $120,000 (60% of $200,000). The remaining $30,000 can be carried over and applied to the following year’s tax return.

This carryover provision applies to both cash and non-cash asset contributions. It allows for strategic tax planning, as a donor can make a substantial contribution in one year while spreading the associated tax deductions over as many as six total years.

Valuation Rules for Contributed Assets

A donor must determine the value of contributed assets according to IRS regulations. For publicly traded securities like stocks and bonds, the value is their Fair Market Value (FMV) on the date of the contribution. This is calculated as the average of the highest and lowest selling prices for the security on that day.

The valuation process is more complex for other non-cash assets, such as restricted stock, privately held business interests, or real estate. These assets lack a public market, so their value must be determined through a formal assessment. This assessment considers factors like business financials, market conditions, and any transfer restrictions.

For any non-cash contribution valued at more than $5,000, the IRS requires the donor to obtain a qualified appraisal. This is a formal report prepared and signed by a qualified appraiser who meets professional standards. The appraisal must be completed no earlier than 60 days before the contribution date and received by the donor before they file their tax return, as failure to do so can result in the disallowance of the deduction.

Sponsoring Organization Contribution Policies

In addition to IRS rules, each DAF sponsoring organization has its own internal policies that act as a different form of limit. These policies dictate the minimum amount required to open an account and for any additional contributions. It is common for organizations to require an initial contribution ranging from $5,000 to $25,000.

These organizations also define which types of assets they are willing to accept. Most DAF sponsors accept cash, publicly traded stocks, and mutual funds. Some larger sponsors have the capacity to accept more complex assets, such as real estate, interests in private equity or hedge funds, or even cryptocurrencies. A donor wishing to contribute such an asset must work with a sponsor that has the policies in place to handle it.

The acceptance of any asset is at the discretion of the sponsoring organization. A DAF sponsor can decline a contribution if it does not align with their risk management or administrative capabilities, even if the asset is permissible under IRS rules. These practical limitations are a factor for donors to consider when selecting a DAF provider.

Required Documentation for Claiming Deductions

To claim a tax deduction for a DAF contribution, a donor must secure specific documentation. For any single contribution of $250 or more, the donor must obtain a contemporaneous written acknowledgment from the DAF sponsoring organization. A canceled check or bank statement alone is not sufficient for contributions at this level.

The acknowledgment letter must contain specific information to be valid. For cash gifts, the letter will state the amount, while for non-cash gifts, it will only describe the property, as the donor is responsible for determining its value. The letter must also include:

• The name of the DAF sponsor
• The date of the contribution
• A description of the asset donated
• A statement confirming that the donor received no goods or services in exchange for the contribution

When a donor contributes non-cash property valued at more than $500, they must file IRS Form 8283, “Noncash Charitable Contributions,” with their tax return. This form reports details about the donated property, including its description, the date it was acquired, and its Fair Market Value. For contributions over $5,000, the form also requires a signature from the qualified appraiser and an authorized officer of the DAF organization.