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, or DAFs, are to support future charitable work. This kind of giving differs greatly from charitable giving as a whole because it's much more likely to , real estate or cryptocurrencies that have gained in value.

That's what my co-author, , that will soon be published in as part of an academic book series.

We examined the IRS filings of all charities from 2020 to 2022, including . Such DAF sponsors include charities affiliated with large financial companies like Vanguard, Schwab and Fidelity. By looking at the types of gifts received by these charities, we found that noncash giving represents more than 16% of the average DAF's revenue versus only about 3% on average for overall charitable giving, which covers everything from animal shelters to orchestras.

This difference is even more pronounced for the largest national DAF operations, which on average had 46% of their incoming assets in noncash form.

These noncash gifts were primarily . We find that while the gets around 33% of its noncash contributions as investments, the average DAF sponsor gets more than 90% of its noncash donations that way.

This share is even higher, , for the typical national DAF organization.

Why it matters

DAFs, first , have become much more widespread over the .

The total value of assets : It grew from US$70 billion in 2014 to more than $251 billion in 2023.

In some ways, DAFs operate like , since donors can get a tax break when they put money into a DAF, even if that money isn't put into use by a charity for years. Donors also retain advisory control over the money they've reserved for future charitable giving.

But unlike foundations, there's very little paperwork required, and there's annually鈥攍ike foundations have to do.

Using investment assets as charitable donations is more advantageous to donors than just putting money in a DAF. One reason is that most large donors are eligible for a tax deduction equal to the full value of the asset that was donated at the time of the gift. That holds true, even if the value has risen significantly from what it initially was worth when the donor acquired it. The second reason is that donors don't need to pay taxes on their capital gains as they would have had they sold it and obtained money in exchange.

Likewise, this boom in gifting investment assets can cut into government tax revenue more than typical cash gifts because it more effectively .

Policymakers, lawmakers and regulators are currently considering whether to for DAFs.

What's next

how the charities that administer DAFs differ from one another. We're finding that some primarily market themselves as a way for donors to reduce their tax payments, while others put more emphasis on helping donors better manage their charitable giving.

This article is republished from under a Creative Commons license. Read the .