How to Use a Private Foundation or Donor-Advised Fund Under the New Bill as a Tax Strategy

The newly passed “Big Beautiful Bill” brings significant updates to tax rules affecting charitable giving—especially for business owners, high-income earners, and families who want to make a long-term impact while also reducing their tax burden.

Two of the most powerful giving tools under the new bill are:

Private Family Foundations (PFFs)
Donor-Advised Funds (DAFs)

This blog will walk you through how these tools work, what’s new in 2025, and how you can use them strategically under the updated tax code.

🔍 What’s New in the 2025 Tax Law for Charitable Giving?

The Big Beautiful Bill keeps most charitable giving provisions intact, but adds clarity and boosts incentives for foundations and DAFs:

Reaffirms the 30% and 60% AGI limits on charitable deductions depending on asset type.
Continues to allow capital gains avoidance on donated appreciated assets (stocks, crypto, real estate).
Reinforces donor control options through DAFs while adding more reporting transparency.
Keeps the foundation giving rules at a 5% minimum distribution requirement annually.
Encourages more philanthropic planning through expanded estate and legacy tax planning benefits.

🏦 Option 1: Set Up a Private Family Foundation

A Private Foundation is a nonprofit organization you or your family control. It allows you to:

Donate large amounts now for a current-year tax deduction.
Keep control of how the money is invested and granted over time.
Involve your children or grandchildren in giving decisions.
Create a legacy of generosity and faith-driven impact.

💡 Tax Benefits:

Immediate deduction up to 30% of AGI for cash, 20% for appreciated assets.
Can avoid capital gains tax when donating long-term appreciated property.
Foundation assets grow tax-deferred, and you direct where grants go each year.

✅ Best For: High-income individuals, business owners with a liquidity event, or those selling appreciated assets like real estate or stocks.

🧾 Option 2: Open a Donor-Advised Fund (DAF)

A DAF is like a “charitable savings account” managed by a public foundation or financial institution. You contribute to it now, receive an immediate tax deduction, and recommend grants to your favorite causes over time.

💡 Tax Benefits:

Deduction up to 60% of AGI for cash and 30% for appreciated property.
Avoid capital gains on donated stock or crypto.
No legal setup or administrative overhead required—easy and flexible.

✅ Best For: Families who want simplicity, flexibility, and lower maintenance.

📈 Strategy Under the New Bill

With rising tax rates and inflation pressures, 2025 is the perfect time to:

Sell appreciated assets and donate the proceeds to avoid capital gains.
Bundle charitable giving into one large donation using a DAF or PFF for maximum tax deduction.
Offset high income from a business sale, property sale, or bonus year.
Fund multiyear giving plans while deducting it all in 2025.

🙏 Faith-Based Legacy Planning

For believers, both PFFs and DAFs allow you to intentionally fund ministries, missions, and causes that align with your values—even long after you’re gone.

You can create: