I’ve always wanted to become successful enough to give away large sums of money.  In “Lottery Lessons”, I dreamed of winning the lottery and giving it all to charity.  In “Going Home Again,” I fantasized about donating money to my old high school as a sort of charitable middle finger to my hometown.  Whatever the reason or motivation, I’ve always planned to be philanthropic.         

     But I haven’t done enough about it.  I have been charitable, as I discuss below, but not systematically.  In contrast to the structure and discipline I have used in other aspects of my life, I have been lazy and haphazard with generosity.   

      So, I decided it’s time to do something about it.  Instead of talking and daydreaming, it’s time to put my money where my charity mouth is.    

My Charitable History  

     I was in college when I first donated money to charity.  I watched a late-night infomercial for St. Jude’s Children’s Hospital and tearfully signed up for a recurring donation.  Those damn sick kids hit me right in the feelers every time.  I pledged to donate $100 a month on my credit card when I absolutely didn’t have $100 a month to pay for it.  I think this lasted for a year or so until I cancelled it, realizing that I was just racking up more high-interest debt.   

     After that, I decided to wait to be charitable until I actually had money to give.  That came shortly after graduating from residency.  An ex-girlfriend’s mother was diagnosed with multiple myeloma shortly after we broke up, and I felt terrible about the timing, so I donated to the Multiple Myeloma Foundation annually in her name for about 10 years.  It wasn’t a lot – no more than a few thousand dollars a year – and the timing was suspect: always in December, just before the tax year ended.  But it was something.   

     Despite not being religious, I went on a mission trip to Uganda early in my medical career.  I later served for about seven years as the Chair of the Department of Emergency Medicine at a hospital, for which I earned a monthly stipend.  During this tenure, I donated $1,000 per month from this stipend to the mission, earmarked to pay tuition for Ugandan medical students who were then obligated to return to work in remote villages for a few years after graduation.  Our ER Group also collectively matched that donation.  The doctor who replaced me as Chair when I stepped down, and our group, continue the tradition to this day.    

     I have given to Smile Train somewhat regularly, as my wife has family experience with cleft lip/palate.  In addition to some irregular late-December donations, we asked our friends to donate to this cause in lieu of gifts at our first son’s baby shower, and we matched the total.   

     We give annually to the school our children attend.  In case you didn’t know, private schools not only charge exorbitant tuition but also ask for contributions throughout the year.  I have also given one-off donations here and there to medical causes or charities my friends care about, including a few charity auctions, which I wrote about in “Charity Auctions: Generosity or Ego?”       

     Let me be clear; none of this is to toot my own horn.  Quite the opposite, in fact.  I’m calling myself out publicly.  If I add all of it up, we’re talking about maybe $200,000 that I’ve given to charity in my whole life.  While it’s not nothing, that number is embarrassingly low given my income, net worth, and publicly proclaimed charitable aspirations.    

 

Time For a Donor-Advised Fund 

     A donor-advised fund (DAF) is a charitable giving vehicle that is administered by a public charity (the provider).  An individual, family, or organization may open a DAF within the provider, which then manages the fund on their behalf.       

     Terminology matters.  An individual contributes money (cash, securities, crypto, etc.) to a DAF.  Since the fund is inside a charity, the contributor may claim a charitable tax deduction in the year the non-refundable contribution is made.  The money in the DAF may be donated to a charity immediately or invested and (hopefully) grown for larger future donations. 

          I first wrote about donor-advised funds back in January of 2024 as one of my goals for the year (which I didn’t complete).  A DAF is attractive to me because I get the best of both worlds: I can contribute now to obtain a tax deduction during my highest-earning years but also invest the money and let it grow tax-free.  Investing contributions gives me time to find a cause I’m passionate about while simultaneously growing my future donations to the amount I’ve always dreamed of.   

     If you want more information on Donor-Advised Funds, there is an excellent 4-part series on DAFs by Rebecca Herbst at Yield & Spread.  There is no need for me to reinvent the wheel here; just go and read that.     

When To Contribute to a DAF 

     I previously wrote about the optimal time to make a DAF contribution.  The article compared the total financial effects (money given to charity, taxes saved, and total money in your pocket) of contributing appreciated stock to a donor-advised fund (DAF) now vs. letting it ride in your brokerage account and contributing it at a later date.  While my results showed that while there is a clear mathematical benefit to waiting, the magnitude depends on six factors; (1) your tax bracket now and in retirement, (2) whether or not you itemize your deductions, (3) your current and future AGI, (4) whether or not you still like the stocks in which you are invested, (5) the dividend amount of the stocks you hold, and (6) the projected volatility of the securities from now until the time you plan to make the contribution.   

Is Now the Right Time for Me to Donate? 

     I evaluated if the time was right for me to open a DAF based on the six factors I mentioned above.  I marked each one with a [+] or [-] based on my specific circumstances: [+] means I should open a DAF now, and [-] means I should wait.   

     (1) I am currently in the highest tax bracket (37%).  I am unsure what it will be in retirement, but it is unlikely to drop below 24% and may reach 35%.  Still, it is likely to be lower than it is now [+].  (2) I still have a mortgage on our primary home as well as our second home.  While I am aggressively paying down my debt, I will likely itemize for the next 3-5 years.  After that, it is unclear [+].  (3) Despite owning businesses, my income will drop off a ledge when I fully retire due to the nature of my partnership in our ER staffing company. 

Therefore, my current AGI is likely as high as it’s ever going to be [+].  (4) I have several individual stocks that I would like to get rid of, but they have large, embedded capital gains [+].  (5) I also have several dividend stocks in a taxable account where they don’t belong, given my tax rate [+].  (6) I still have a long timeframe before I begin to donate large amounts to charity, so even if there is volatility ahead in our overheated stock market, I have time to ride it out [-].   

     Additionally, tax changes are coming in 2026 that make contributing in 2025 more appealing.   And there are non-financial considerations as well.  As I alluded to in the introduction, talk is cheap and dreams are free, so at some point you just have to take action.  After I put it all together, it was clear that now is the time for me to take the plunge and open a DAF.   

Choosing the Right DAF Provider 

     There are several options when choosing a DAF provider.  There are established companies, such as Vanguard, Fidelity, and Charles Schwab, as well as lesser-known start-ups like Daffy and Charityvest.  These days, all providers have low-cost index funds and/or ETFs in which to invest, allow you to donate money to almost any charity of your choice, and provide tax information to give to your accountant.  

     Choosing the right DAF provider, therefore, comes down to cost vs. security.  All DAF providers charge for their services, with the established companies charging higher rates than the start-ups.  Fees can be as low as $36 per year and as high as 0.85% of assets under management (regular readers know how I feel about AUM fees).  The lower the cost, the more money you will have to donate to charity.     

     However, risk matters as well.  Are you comfortable contributing money to a DAF housed by a start-up provider?  What happens if the provider goes out of business?  There is a great article discussing the pros and cons of different providers at the Effective Altruism Forum, “A Comparison of Donor-Advised Fund Providers,” that I used to help make my decision.   

     For me, it ultimately came down to Daffy vs Vanguard.  I already use Vanguard for my SEP IRA, Roth IRA, and one of my brokerage accounts.  But the frugalist in me couldn’t ignore their 0.6% annual “AUM” fee, which, compounded for the length of time I plan on holding money in the DAF, combined with the amount I plan to contribute, constitutes an unacceptable amount of money that would ultimately go to the provider and not a charity.  I’m also not a fan of Vanguard’s difficult-to-use online platform.  So, I went with the lower-cost, easier-to-use provider, Daffy.   

* This post is not sponsored by Daffy or anyone else. * 

My 2025 Contribution 

     To put my money where my charity mouth is, I contributed $234,018.32 of appreciated stock to my newly opened donor-advised fund in two November transactions. 

  

What I Contributed 

     Like many of my individual stock holdings, I first purchased Apple (APPL) in late 2008 during the Great Financial Crisis (GFC).  I bought more shares at various times, with my last purchase in 2012.  Despite selling some along the way as the stock price rose dramatically, I still had just over 579 shares that had increased by over 1,100%!.  Since Apple was my most highly appreciated individual stock, it was a no-brainer to contribute it to my DAF.   

     Note: The discrepancies between the Total Market Value (below) and the Stock Contribution Deposited (above), as well as the Contribution for 2025 and the Tax-Deductible amount (both above), are about timing.  Because I donated shares of stock, not a fixed dollar amount, the stock prices will fluctuate depending on exactly when the transaction takes place.  It can take 2-4 days from the time you initiate the transfer with your brokerage until they actually transfer the shares to the DAF provider, and the provider sells the stock.     

     I also contributed the 150 shares of BRK-B that I wrote about in “How to Calculate Investment Returns.”  These shares were up 573.9% since purchase.   

     Contributing these two stocks gave me the rough dollar amount I was looking for in 2025.  I still have several other individual stocks that have appreciated enough to contribute in the coming years.  Now, let’s look at why I am donating appreciated stocks in the first place.  

Tax Implications  

    For most Americans, including most medical professionals, “The Myth of the Tax Write-Off” leads them to believe they can write off more than the IRS allows.  To make use of any tax deduction, you must first itemize your deductions.  Since nearly 90% of all American taxpayers take the standard deduction instead, few people can deduct anything.     

     Itemized deductions are qualified expenses that reduce your taxable income: Charitable donations, SALT (state and local taxes), home mortgage interest, specified business expenses, and unreimbursed medical expenses that exceed 7% of AGI.  I live in Texas, which has no state income tax but makes up for it with high property taxes.  Since I have two homes in Texas with two large property tax bills and two mortgages, I itemize.  Therefore, by contributing to my DAF, I would traditionally be able to receive a tax deduction for the total amount.  Except . . .    

2026 Tax Changes  

     The 2025 update to the Tax Cuts and Jobs Act (TCJA) brought a few big changes in how charitable contributions will be deducted starting in 2026.    

1. An Above-The-Line Deduction for Those Who Take the Standard Deduction.  Even if you don’t itemize, you can now deduct cash contributions up to $1,000 for single filers and $2,000 for those who are married filing jointly.  This allows everyone to benefit from being charitable.  Because it’s an above-the-line deduction, it reduces AGI before other credits and deductions are applied, potentially benefiting taxpayers who are just above the eligibility amount for certain programs and tax benefits.     

2. A Reduction in Charitable Deductions for Those Who Itemize.  Starting in 2026, charitable contributions will be reduced by 0.5% of AGI, applying to both cash and noncash contributions.  It is calculated after applying limits on the percentage of AGI (deductible contributions are limited to 60% of AGI for cash and 30% for noncash donations).    

3. New Limits to Deductions for Itemizers in the Top Tax Bracket.  Starting in 2026, charitable deductions are capped at 35%, even for those in the 37% bracket (like me).   

Effective Giving  

     Since I itemize my taxes and my AGI is high enough, I will be able to entirely write off 100% of these charitable contributions at 37% in 2025.  These contributions will reduce my AGI by $231,044, resulting in $85,486 in tax savings.   

     However, the math gets more interesting since I donated appreciated stock.  Unless I planned to hold AAPL and BRK-B until I died, passing them along at a stepped-up basis to my heirs, I would have to pay capital gains tax when I sold them, since they were held in a taxable brokerage account.  My capital gains tax rate is 20%, plus a 3.8% NIIT tax, for a total of 23.8%.     

     As the table shows, if I had sold these two stocks in my brokerage account, I would be left with $181,722.28 after paying capital gains taxes.  By contributing them to my DAF, I will save $85,486 on my 2025 Federal Income Taxes, which is the same as putting money back in my pocket.  So, I have $96,286.28 less net worth than I did before I made the contribution (-$231,044.28 contributed + $49,272 that I would have paid in capital gains taxes + the $85,486 I saved on income taxes).  Another way of looking at it is that I “paid” $96,286.28 in order to control $231,044.28 that will eventually go to charity.  I consider that effective giving.         

What If I Had Waited Until 2026? 

     If I had procrastinated again and contributed these stocks at the same price in 2026, the new tax law changes would reduce the tax effectiveness.  The new “AGI Floor” would reduce the amount of tax-deductible charitable contributions by 0.5% of AGI.  So, if I had an AGI of $1,000,000, the first $5,000 would not be deductible.  Next, I would lose 2% on the entire amount, since there will now be a cap at the 35% marginal tax rate.   

     The total difference in tax savings would be $6,371.  That isn’t a lot compared to what I contributed, but it isn’t nothing.  Regardless, I would rather that this money go to charity or back in my pocket than to the government.   

Conclusion  

     Donor Advised Funds work best when you have a high AGI and highly appreciated stock held in a taxable account.  Many high-income medical professionals meet these criteria.  There is still a little time left to take full advantage of the current bull market in stocks and 2025’s more generous charitable treatment.  I might even donate more before the end of the year.   

     A journey of a thousand miles begins with a single step, and my charitable journey has just begun with these DAF contributions.  I will provide periodic updates on how my investments are doing within the DAF, as well as new contributions and donations.  It is time for me to become generously disciplined in the discipline of being generous . . . or something along those lines, and I need you to keep me accountable.       

What are your charitable ambitions?  Have you considered utilizing a donor-advised fund?  Leave your comments below and subscribe to Business Is the Best Medicine for more articles and for future updates on my DAF balance.