As President Donald Trump’s “big beautiful bill” moves through Congress, a provision hiking taxes on private foundations could make another form of philanthropy even more attractive: donor-advised funds.
Donor-advised funds, or DAFs, are accounts where donors can contribute funds, immediately get a tax deduction, and “advise” on where to donate — and they are becoming increasingly popular.
As Daniel Heist, a professor at Brigham Young University and a lead researcher on the 2025 National Survey of DAF Donors, put it, “they’re growing like crazy.”
Donors can contribute non-cash assets, like appreciated securities or crypto, to DAFs, and the funds grow over time.
BI spoke with academics, DAF sponsors, and nonprofits about why major donors use DAFs, how the tax bill and Trump are changing the calculus, and the risks of the “opaque” form of philanthropy.
DAFs have a few key differences compared to private foundations
Sponsoring organizations, which are themselves public charities, operate DAFs. Some of the largest are connected to investment firms like Fidelity, Vanguard, and Schwab, though others include community foundations or religious organizations.
Technically, donors don’t control the funds in their DAF, but practically speaking, they can direct the money to any accredited charity.
“As long as you’re following the rules of the DAF provider, you should always have those recommendations honored,” Mitch Stein, the head of strategy at Chariot, a technology company focused on DAFs, said.
Private foundations have to distribute at least 5% of their assets annually for charitable purposes, but DAFs don’t have payout requirements. Donors also don’t report their gifts to individual organizations on their taxes, and instead report that they gave to the DAF.
Republicans’ tax bill hits private foundations
If Trump’s fiscal agenda passes in the Senate (it has already passed in the House of Representatives), it would raise the current 1.39% tax on private foundations’ investment incomes. The rate would rise to 10% on foundations worth $5 billion or more, to 5% for those worth between $250 and $5 billion, and to 2.8% for those worth between $50 million and $250 million. It wouldn’t change for foundations worth less than $50 million.
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“There already was a substantial amount of momentum toward donor-advised funds, and a bill like this would only magnify that,” Brian Mittendorf, a professor at Ohio State University who has studied DAFs, told BI.
DAFs are especially helpful for the ultrawealthy
Though people across net worths use DAFs — Heist called them a common “mid-range philanthropic tool” — they’re particularly attractive to the rich. The 2025 survey of DAF donors found that of 2,100 respondents, who were surveyed between July to September 2024, 96% had a net worth of more than $1 million.
“I definitely see a trend away from private foundations,” Heist said. Rebecca Moffett, the president of Vanguard Charitable, a prominent DAF provider, said she’s seeing the same pattern.
The main draw has to do with taxes, according to data and the experts. In the 2025 survey, 62% of donors said tax advantages were a strong motivation for opening a DAF account.
Jeffrey Correa, Senior Director of US philanthropy at the International Rescue Committee, told BI that there’s been an “explosion” of major donors giving through DAFs.
The ability to contribute non-cash assets is also a big factor. Donating appreciated assets lets the donor avoid paying capital gains taxes (in the 2025 survey, 51% of respondents said reducing capital gains taxes was a big consideration).
Convenience is another benefit, experts said, since DAFs are more streamlined and cheap than private foundations. Then there’s the question of privacy, beyond how DAF donations show up on tax filings. Donors can choose varying levels of anonymity when donating to recipient nonprofits.
Only 4% of donors in the 2025 survey opted to be totally anonymous to the recipient organizations, most commonly to avoid public recognition or solicitation. Just 24% said they wanted to avoid scrutiny.
Generally, the experts BI spoke with said they don’t see confidentiality as the primary appeal of DAFs. Moffett and Correa said they haven’t seen more major donors opt for anonymity or express concerns about confidentiality.
Giving can be ‘opaque’
Most of those BI spoke to were enthusiastic about DAFs, but some flagged risks.
Mittendorf and Helen Flannery, an associate fellow at the Institute for Policy Studies, found through a study that DAFs distribute grants to politically engaged organizations 1.7 times more than other funders.
“They can be great conduits for dark money because they’re completely opaque,” Flannery said, adding that the public doesn’t always know where donors’ DAF funds go.
Risks aside, the wealthy seem as interested as ever in using DAFs — and in turn slowly eroding the private foundations that once defined the philanthropic world.
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