A Donor-Advised Fund gives you an immediate tax deduction when you contribute, and the freedom to recommend grants over time. But that deduction isn't unlimited. How much you can deduct in a given year depends on your income, what you give, and, starting in 2026, a few new rules from the One Big Beautiful Bill Act.
If you're planning a large gift this year, or advising a client who is, here's how the limits work.
The basic limits: 60% for cash, 30% for appreciated assets
A Donor-Advised Fund sponsor like UI Charitable is a public charity. That means gifts to your DAF follow the same adjusted gross income (AGI) limits as gifts to other public charities:
What you give | Annual Deduction Limit | How it’s valued |
Cash | Up to 60% of AGI | Amount given |
Long-term appreciated assets (held more than a year), like stock | Up to 30% of AGI | Fair Market Value |
The 30% limit is the one that trips people up. Giving appreciated stock is often the most tax-efficient way to fund a DAF, because you may be able to deduct its fair market value and avoid recognizing capital gain on the appreciation. The trade-off is a lower annual ceiling.
For advisors: IRS Publication 526 essentially lets donors elect the 50% limit for capital gain property instead of 30%. The catch is that the deduction then changes to cost basis rather than fair market value. It only makes sense when the built-in gain is small.
The 30% limit generally also applies to long-term appreciated capital gain property donated at fair market value, which can include publicly traded securities as well as assets such as cryptocurrency, private business interests, real estate, restricted stock, and certain private equity or venture capital interests. The applicable deduction and valuation rules depend on the specific asset and circumstances.
What changed in 2026
The One Big Beautiful Bill Act (OBBBA) made several changes to charitable deductions, and most of them start with the 2026 tax year. According to the Tax Foundation, these are the ones that matter for DAF donors:
A new 0.5% floor for itemizers. Charitable gifts below 0.5% of your AGI are no longer deductible. Only the amount above that line counts. With $200,000 of AGI, the 0.5% floor is $1,000, so the first $1,000 of otherwise deductible charitable contributions generally won’t generate a current-year deduction.
A reduced benefit for taxpayers in the 37% bracket. A new limitation generally reduces the maximum federal tax benefit of certain itemized deductions from 37 cents to 35 cents per dollar when the deductions offset income otherwise taxed at the 37% rate.
The 60% cash limit is permanent. It was set to expire. OBBBA locked it in.
The practical takeaway: for most DAF donors, the deduction still comes from itemizing. The new floor also makes bunching (combining several years of giving into one year) a little more attractive, since you only lose the floor amount once. While OBBBA also created a limited charitable deduction for non-itemizers beginning in 2026, contributions to donor-advised funds are specifically excluded from that deduction.
Giving more than the AGI limit? The excess can generally carry forward
Going over the limit doesn't mean losing the deduction. Per IRS Publication 526, if your contributions exceed the limit for the year, "you can carry over the excess to the next 5 tax years."
This is what makes large, one-time DAF gifts workable. You can contribute a big block of stock in a high-income year, like the year you sell a business or exercise options. You deduct what the limit allows now and use the rest over the following five years. Meanwhile, the full amount is already in your fund and available to grant.
A quick example
Say a married couple with $300,000 of AGI itemizes in 2026. They contribute $120,000 of stock they've held for years to their DAF.
Step | Amount |
Stock contributed (Fair Market Value) | $120,000 |
30% of AGI | $90,000 |
0.5% AGI floor (0.5% x $300,000) | $1,500 |
Deductible in 2026 | $88,500 |
Potential carryforward (up to 5 years) | $31,500* |
*When the contribution already exceeds the applicable percentage limitation and creates a carryforward, the statute generally adds the amount disallowed by the 0.5% floor to that carryforward.
The capital gains savings. If they sold the stock first and donated the cash, they'd owe tax on that $90,000 gain. At a 20% federal long-term capital gains rate, that's $18,000 in tax. Giving the shares directly avoids that tax entirely, on top of the deduction. State taxes and the 3.8% net investment income tax can make the savings even larger.
Capital gains math | Amount |
Fair Market Value | $120,000 |
Original cost basis (assumed) | $30,000 |
Built-in gain | $90,000 |
Federal capital gains tax avoided (20%) | $18,000 |
If they'd given $120,000 in cash instead, the 60% ($180,000) would have covered the whole gift. But they'd give up the capital gains savings that make stock the better choice for many donors.
One note for advisors: the new 0.5% floor also interacts with carryforwards, and the ordering rules are new. Confirm the exact math with a tax preparer before a large gift.
Keep the paperwork
The IRS is specific about DAF gifts. Under Publication 526, you can't deduct a DAF contribution without a contemporaneous written acknowledgment from the sponsor confirming it has exclusive legal control over the assets. UI Charitable provides this acknowledgment for every contribution.
For noncash gifts, a few more rules apply. Noncash gifts over $500 are reported on Form 8283. Most gifts of property over $5,000 also need a qualified appraisal. Publicly traded stock is the main exception, since its value is easy to set.
The bottom line
DAF deduction limits come down to three questions:
What you're giving
How much you earn
Whether you itemize
Cash gets a 60% ceiling, appreciated assets get 30%, and anything over the limit carries forward five years. Starting in 2026, the new 0.5% floor and the 35% cap for top earners are worth building into the plan.
If you're weighing a large gift this year, talk with your tax advisor about timing. When you're ready, our team is happy to walk you or your client through opening a UI Charitable fund.
Frequently Asked Questions:
Can I deduct a DAF contribution if I take the standard deduction?
No. You need to itemize to deduct a gift to a donor-advised fund. OBBBA's new deduction for non-itemizers, which starts in 2026, specifically excludes DAF contributions.
Do I get the deduction when I contribute, or when my fund makes a grant?
When you contribute. The deduction applies to the tax year the gift reaches your DAF, not the year you recommend grants. That's why you can fund the account in a high-income year and support charities over time.
What happens if I don't use my carryforward within five years?
Publication 526 allows excess contributions to be carried over to the next five tax years. Any amount still unused after that can't be deducted, so it's worth planning large gifts with your tax advisor.
This article is for general information and isn't tax or legal advice. Please consult a qualified tax professional about your situation.
