So, the tax rules just changed. Again. If you’ve been using a donor-advised fund (DAF) to manage your giving, the "One Big Beautiful Bill Act" (OBBBA) probably feels like a personal headache right now. Honestly, there’s been a ton of noise about how these new 2026 regulations "kill" the tax benefits of DAFs.
That’s not exactly true. But it’s not exactly business as usual either.
We are officially in a new era of philanthropy where the "how" and "when" of your giving matters way more than the "why." If you’re trying to keep up with the donor-advised funds regulation news today, you’ve probably heard about floors, caps, and the "universal deduction." It’s a lot. Basically, the IRS and Congress decided to tighten the belt on high earners while throwing a small bone to everyone else.
If you aren't careful, you might end up leaving thousands of dollars on the table this year just because you didn't adjust your timing.
The 0.5% floor: The math nobody wants to do
Here is the big one. Starting January 1, 2026, the way you deduct your gifts has a new hurdle. It’s called a "floor."
Essentially, you can only start deducting your charitable contributions once you’ve given away more than 0.5% of your Adjusted Gross Income (AGI). Think of it like a deductible on your health insurance. You have to pay into the system before the "benefits" (the tax breaks) kick in.
Let's say your household pulls in $300,000 this year. Under the new rules, the first $1,500 you give to charity—whether it's to your church, a local food bank, or your DAF—is effectively "dead" from a tax perspective. You get zero deduction for it. Only the dollars above that $1,500 mark actually lower your tax bill.
It feels a bit stingy, doesn't it?
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For people who used to write a few small checks and call it a day, this is a massive shift. You’re no longer getting a dollar-for-dollar benefit from the very first cent. If you’re an itemizer, you’ve got to clear that hurdle first.
High earners are getting a haircut
If you’re lucky enough to be in the top 37% tax bracket, the news gets a little more annoying.
In the past, every dollar you gave to a DAF could potentially save you 37 cents in taxes. It was a direct offset of your highest-taxed income. Not anymore. The OBBBA has officially capped the value of itemized charitable deductions at 35%.
It’s a 2% "tax" on your generosity, basically.
If you put $100,000 into a donor-advised fund today, your max federal tax savings is $35,000, even if you’re paying the 37% rate on your income. When you combine this 35% cap with the 0.5% AGI floor, the "math of giving" looks a lot less attractive for high-net-worth families than it did just two years ago.
The "Universal Deduction" trap for DAFs
There is some "good" news in the donor-advised funds regulation news today, but it comes with a massive asterisk.
The government finally brought back a deduction for people who don’t itemize. If you take the standard deduction (which is now $16,100 for singles and $32,200 for couples in 2026), you can still deduct up to $1,000 (single) or $2,000 (joint) of your gifts.
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But—and this is a huge but—DAFs are excluded.
If you want to claim that "above-the-line" deduction, you have to give the cash directly to a public charity. You cannot put it into your DAF first. If you do, you lose the deduction entirely. It’s a clear signal from Washington: they want small-dollar donors to give "hot" cash that charities can use immediately, rather than parking it in an investment account.
Is the "Bunching" strategy still alive?
You might be wondering if you should even bother with a DAF anymore.
Sorta.
The strategy of "bunching"—where you dump three or four years' worth of giving into a DAF in a single tax year—is actually more important now than ever. Why? Because it’s the only way most people will comfortably clear that 0.5% AGI floor and make itemizing worth it.
Instead of giving $5,000 every year and losing $1,500 of the deduction each time to the floor, you might give $20,000 in one year. You only lose the floor once, and you maximize the rest of the deduction. Then, you use the DAF to distribute that money over the next four years.
It’s a bit of a shell game, but it’s the legal way to navigate these weird new thresholds.
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Why the IRS is looking at "Sponsoring Organizations"
Beyond your personal taxes, there’s been a lot of movement on the regulatory side for the companies that hold your DAF, like Fidelity Charitable or Schwab Charitable.
The IRS has been pushing for stricter definitions of what counts as a "taxable distribution." They’re worried about people using DAFs to pay for things that benefit themselves—like tickets to a gala or a school's "voluntary" tuition fee.
The latest guidance suggests that the IRS is going to be much more aggressive about "prohibited benefits." If your DAF distribution results in you getting something tangible in return, the penalties are going to be stiff. We’re talking a 125% excise tax on the donor.
Don't mess around with this. If you’re used to using your fund for anything that feels even slightly like a "quid pro quo," stop.
What about the ACE Act?
You might remember the ACE Act (Accelerating Charitable Efforts) that everyone was panicking about a few years back. While it didn't pass in its original, most "draconian" form, many of its ideas were cannibalized into the current 2026 rules.
The 15-year or 50-year distribution "clocks" aren't a reality yet for most funds, but the pressure is building. There is a real movement in the donor-advised funds regulation news today to ensure that money doesn't just sit in these accounts forever. While we don't have a national "payout mandate" yet, some states (looking at you, California and New York) have been flirting with their own transparency laws to see how fast money actually leaves these funds.
Specific actions you should take right now
If you’re feeling a bit overwhelmed by the changes, here is how you should actually handle your money this year:
- Check your AGI. Before you make your first big gift of the year, look at last year's tax return. Calculate what 0.5% of your income looks like. That is your "dead zone" for donations.
- Separate your giving. If you aren't itemizing, stop putting your small $50 or $100 gifts into your DAF. Give them directly to the charity in cash so you can use the new $1,000/$2,000 universal deduction.
- Evaluate appreciated stock. The 60% AGI limit for cash is now permanent, which is great. But don't forget that giving appreciated stock to a DAF is still one of the best ways to avoid capital gains tax, even with the new 35% deduction cap.
- Consider a QCD. If you’re over 70½, the Qualified Charitable Distribution (QCD) from your IRA is still the "holy grail" of giving. It bypasses all these new rules—no floors, no caps, no itemizing required. The limit for 2026 has even ticked up to $111,000.
- Talk to your DAF provider. Ask them specifically about the new IRS "prohibited benefit" audits. Ensure any recurring grants you have set up don't trigger these new red flags.
The rules are definitely more complex, and frankly, a little less generous. But if you're strategic about when you fund your DAF, you can still make the math work in your favor while supporting the causes you care about. Just don't assume the old playbook still works. It doesn't.