In an impressive demonstration of philanthropic spirit, donor-advised funds (DAFs) experienced significant growth in charitable contributions in 2025, as reported by DAFgiving360, one of the largest DAF administrators. Charitable donations reached a remarkable $9.9 billion, marking an increase of $2.2 billion, or 28%, from the previous year. This surge can be attributed to strong stock market returns combined with favorable tax conditions that incentivized high-net-worth individuals to increase their charitable giving.
Under the DAF structure, donors contribute cash or assets, gaining an immediate tax deduction before deciding which charities will receive the funds. This method presents a strategic advantage for those looking to transfer appreciated assets without incurring capital gains tax. Donors are increasingly leveraging the benefits of donating stocks, real estate, and even cryptocurrencies, as these assets continue to appreciate while in the fund. Julie Sunwoo, president of DAFgiving360, highlighted that a record 74% of contributions in the last year were made in non-cash assets, showcasing a trend among wealthy donors looking for efficient charitable strategies.
Sunwoo attributes much of the rise in charitable giving to the recent passage of significant tax reform legislation known as the One Big Beautiful Bill Act, which was enacted in July. This legislation alters tax benefits for high-income donors, prompting many advisors to recommend accelerated charitable contributions to take advantage of expiring tax perks. The effective tax benefit for top earners who engage in charitable giving has been reduced from 37% to 35%. According to projections by the Indiana University Lilly Family School of Philanthropy, these changes could lead to an annual decrease in charitable donations amounting to approximately $4.1 billion.
Moreover, the tax reform has introduced limitations on the ability of wealthy donors to deduct charitable contributions, requiring them to donate above a threshold of 0.5% of their adjusted gross income to gain any tax benefit. For example, a taxpayer with an income of $2 million would not see tax incentives for the first $10,000 in annual giving. Tax advisor David Perez stated that he has guided clients to fund their DAFs with contributions spanning three to five years in anticipation of the upcoming tax changes. This strategy allows donors to still support charities over an extended period even after the tax incentives decrease.
While donor-advised funds offer streamlined management of charitable donations, they create a different set of challenges compared to direct donations. DAFs cannot be used for purchasing tickets to events or galas, which typically come with partial tax deductions when bought directly from charities. Additionally, while setting up a DAF may be relatively straightforward, the process of recommending grants requires more time and effort compared to simply writing a check. As Perez notes, this added complexity may cause some donors to reconsider their philanthropic approaches, weighing the potential inconvenience against their charitable aspirations.
The significant increase in charitable contributions through DAFs in 2025 illustrates how high-net-worth individuals are responding to both market conditions and changes in tax legislation. This trend signals a shift in the landscape of philanthropy, driven by strategic financial planning and the pursuit of meaningful contributions to charitable causes.
