Taxes · 4 min read · Updated November 10, 2026

Charitable giving: DAFs, QCDs and appreciated stock

Illustrative examples, education not advice.

In plain words

Giving is about values first. But how you give can change how much reaches the causes you care about. Wealthy families rarely write a check from checking. They give the asset that’s cheapest to give, in the year it saves the most tax. Three tools make that possible for ordinary households too.

1. Gifts of appreciated stock. If you give a stock or fund you’ve held more than a year directly to a charity, you generally don’t pay capital gains tax on the growth, and if you itemize, you can usually deduct its full market value. The charity, being tax-exempt, can sell it tax-free.

2. Donor-advised funds (DAFs). A DAF is a charitable account held by a sponsoring charity. You contribute cash or stock, take a deduction that year if you itemize, and then recommend grants to charities over the following years. Many people use it to bunch several years of giving into one year, so they itemize that year and take the standard deduction in others.

3. Qualified charitable distributions (QCDs). From age 70½, you can send money directly from a traditional IRA to a charity. A QCD isn’t included in your income, and once you’re of RMD age it counts toward your required minimum distribution. The 2026 limit is $111,000 per person. You can’t send a QCD to a DAF.

New 2026 rules under the 2025 tax law:

People who don’t itemize can deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to qualifying charities. Gifts to DAFs and supporting organizations don’t count for this.
People who do itemize can deduct only gifts above 0.5% of their adjusted gross income.
For the highest earners, the tax value of itemized deductions is capped.

How it helps real people

These tools let a family give the same amount at a lower cost, or give more for the same cost.

A retiree who doesn’t itemize can make gifts through QCDs and get a tax benefit she otherwise wouldn’t, since the money never shows up as income. That can also keep Social Security less taxed and Medicare premiums lower.
A family with a one-time windfall, such as a bonus or business sale, can fund a DAF in that high-income year and give from it for a decade.
An investor with a highly appreciated fund can give shares instead of cash and rebuy similar shares with the cash, resetting their cost basis higher.

A worked example

Illustrative. Ruth, 74, gives $8,000 a year to her church and a food bank. She takes the standard deduction, and her IRA RMD is $30,000.

Before: she withdraws her full $30,000 RMD as income, then writes $8,000 of checks. She can deduct only up to $1,000 of that as a non-itemizer in 2026.
With QCDs: she has her IRA send $8,000 directly to the two charities. Her taxable RMD income drops to $22,000. At her 12% bracket, that saves about $960 in federal income tax, compared with about $120 from the non-itemizer deduction.

Illustrative. Ben and Alana, 48, normally give $10,000 a year. In 2026, after a large bonus, they put $50,000 of appreciated fund shares (cost $20,000) into a DAF. They itemize that year, deducting $50,000 (minus the 0.5% floor), and avoid tax on the $30,000 gain. They then recommend $10,000 of grants a year for five years and take the standard deduction in those years.

These numbers are illustrative only.

Who it’s for

People who give regularly and want to give efficiently.
IRA owners 70½ and over, especially those with RMDs.
People with appreciated investments or a high-income year.

Who it’s not for

People who give small amounts occasionally. The new non-itemizer deduction may be enough.
People who may need the money back. Gifts to a DAF are irrevocable.

Risks and trade-offs

Irrevocable gifts. Money in a DAF can only go to charity.
DAF fees and investment options vary by sponsor.
Deduction limits. Deductions are capped as a percentage of income, generally 30% of AGI for appreciated stock given to a public charity and up to 60% for cash. Extra amounts carry forward five years.
Record keeping. Gifts of $250 or more need a written acknowledgement, and larger noncash gifts may need an appraisal.

Common mistakes

Taking the IRA withdrawal yourself and then giving it. A QCD must go directly from the IRA to the charity.
Selling stock first, then donating the cash. You pay the capital gains tax you could have avoided.
Giving losing investments. Sell them instead, take the loss, and give the cash.
Making QCDs before 70½, or to a DAF or private foundation, which don’t qualify.
Forgetting state rules. State tax treatment can differ.

FAQs

Can a QCD come from my 401(k)?

Not directly. QCDs come from IRAs. You could roll 401(k) money to an IRA first.

Can a married couple each do $111,000?

Yes. The limit is per IRA owner, for 2026.

Do I get a deduction for a QCD too?

No. The benefit is that it’s left out of your income. You can’t also deduct it.

What about life insurance and charity?

Some families name a charity as a policy beneficiary, or use a policy to replace for heirs the value of assets given to charity. See wealth replacement.

How much can I give from a DAF each year?

There’s no required amount for most DAFs. Some sponsors have activity rules.

Your next step

Ask VeraLife (/#ask) which giving method could save you the most tax this year.

Education, not advice. Examples are illustrative. VeraLife.ai is not a registered investment adviser, broker-dealer or insurance agency.