A donor-advised fund, or DAF, can be a remarkably flexible charitable-giving tool.

You contribute money or other assets to the DAF, potentially receive a charitable deduction in the year of the contribution, and then recommend grants to charitable organizations over time.

But there is an important limitation that sometimes surprises donors:

Once money goes into a donor-advised fund, it is charitable money.

You cannot use the account like a personal checking account simply because the expense is connected to a charity.

That distinction becomes especially important when you are considering gala tickets, school tuition, athletic programs, memberships, scholarships, political organizations, fundraising events, or payments that provide some benefit back to you or your family.

So what exactly can a donor-advised fund support?

And what is off limits?

Start With the Basic Rule

A DAF can generally make grants to qualifying charitable organizations for legitimate charitable purposes.

For example, major national DAF sponsors generally permit grants to most IRS-qualified 501(c)(3) public charities, along with certain private operating foundations and qualifying governmental entities.

That means a DAF may generally be used to support organizations such as:

• food banks;
• hospitals and medical charities;
• animal shelters;
• religious organizations;
• colleges and universities;
• museums;
• public charities supporting veterans;
• environmental organizations;
• homeless shelters;
• disaster-relief organizations;
• arts organizations;
• scholarship programs operated by qualifying charities;
• community foundations; and
• many other nonprofit organizations.

But qualifying as a charity is only the first step.

The purpose of the particular grant matters too.

You Can Support General Operations

One of the simplest uses of a DAF is making an unrestricted grant to a public charity.

Suppose you want to support your local animal shelter with $5,000.

You can generally recommend a $5,000 grant from your DAF for:

General operating support.

The charity can then use that money for legitimate charitable expenses such as:

• veterinary care;
• food;
• staffing;
• building expenses;
• supplies;
• transportation;
• outreach; or
• other organizational needs.

Many charities actually prefer unrestricted grants because they give the organization flexibility to use funds where they are needed most.

You Can Support a Specific Charitable Program

You do not always have to give unrestricted funds.

DAF sponsors often allow donors to recommend that a grant be used for a particular charitable project or program.

For example, Vanguard Charitable identifies permissible purposes including general operating expenses, annual funds, capital campaigns, scholarship programs, class gifts, event underwriting, and specific projects.

So you might recommend:

$10,000 for the charity’s food pantry program

or:

$25,000 toward construction of a new animal shelter

or:

$5,000 for the organization’s scholarship fund.

That is generally different from attempting to direct the money to a specific person.

And that distinction matters.

You Can Support a Scholarship Program

A DAF can generally support a legitimate scholarship program administered by a qualifying charity.

Suppose your alma mater has a scholarship fund for students from your hometown.

You might recommend a DAF grant to:

The University Scholarship Fund

with the purpose:

Scholarships for students graduating from Smith High School.

That may be perfectly acceptable if the university or other qualifying charity controls the scholarship program and selects the recipients.

What you generally cannot do is say:

“Please use $25,000 from my DAF to pay my niece Emily’s college tuition.”

A DAF generally cannot be used to pay tuition for a particular individual selected by the donor. Fidelity Charitable, for example, permits grants to support a charity-administered scholarship program but does not permit the donor to choose a specific student’s tuition payment.

The rule is essentially:

Support the charitable program? Yes.

Pay a particular person’s bill? Usually no.

You Can Support a Capital Campaign

Suppose a hospital is raising $20 million for a new cancer-treatment center.

Your DAF can generally make a grant toward the hospital’s capital campaign.

The same may be true for:

• a church building fund;
• a new community center;
• a school library;
• a museum expansion;
• a nonprofit’s new headquarters; or
• construction of an animal-rescue facility.

The charitable organization receives the money, and the funds are used for the designated charitable purpose.

You Can Support Religious Organizations

DAFs can generally make grants to qualifying churches, synagogues, mosques, temples, religious schools, and other eligible religious organizations.

That can include general operating support, charitable programs, building campaigns, food assistance, community outreach, and other qualifying purposes.

Religious organizations occupy a somewhat unusual position under federal tax law because many churches qualify as public charities without necessarily going through the same exemption-application process as other nonprofits.

Major DAF sponsors maintain procedures for determining whether an organization is eligible before issuing the grant.

You Can Help Underwrite a Charity Event

Suppose a local hospital is holding a fundraising gala.

You do not want to attend.

You simply want to give $10,000 toward the cost of holding the event so more of the money raised can benefit the hospital.

That can generally be permissible.

Fidelity Charitable, for example, allows a DAF grant for general support or recognition connected with an event so long as the grant is not paying for attendance or another benefit received by the donor.

The key question is always:

Are you receiving something of value in return?

If not, the DAF may generally be used.

If yes, things become much more complicated.

You Generally Cannot Buy Gala Tickets With Your DAF

This is probably one of the most common DAF mistakes.

Suppose a charity is holding a gala.

Tickets cost $500 each.

The invitation says:

$500 ticket — $300 tax deductible.

You might think:

“Great. I’ll pay $200 personally for the dinner and use my DAF for the $300 charitable portion.”

Generally, no.

Major DAF sponsors prohibit this type of split or bifurcated payment.

If attending the event requires you to pay $500, you generally need to pay the entire $500 personally.

Fidelity Charitable expressly states that DAF assets cannot pay any portion of the cost required for the donor to attend a charitable event—even if part of the ticket price would otherwise qualify as a deductible charitable contribution.

You can potentially pay the full admission price personally and then separately recommend an additional DAF grant for which you receive no goods or services.

For example:

Gala admission: $500 personally.

Additional charitable contribution: $5,000 from DAF.

That may work.

But using the DAF to obtain your seat at the table generally does not.

You Cannot Buy Auction Items

The same principle applies to charitable auctions.

Suppose you attend a charity auction and bid $2,000 for a vacation package.

Even if the charity receives the money, you are receiving something valuable in exchange.

That is not simply a charitable grant.

DAF sponsors generally prohibit using DAF assets to purchase auction items because doing so would provide the donor with a financial benefit.

The same would ordinarily apply to:

• artwork;
• trips;
• restaurant packages;
• sporting-event tickets;
• memorabilia;
• jewelry; or
• other auction merchandise.

If you want the item, pay personally.

You Cannot Buy Raffle Tickets

A charitable raffle may raise money for an excellent cause.

But you are purchasing an opportunity to win something.

That means you are potentially receiving value in exchange for the payment.

DAF assets generally cannot be used to purchase raffle tickets. Fidelity specifically identifies raffle tickets as an example of a prohibited more-than-incidental benefit.

So:

$5,000 outright gift to the charity: potentially yes.

$5,000 worth of raffle tickets: no.

Memberships Can Be Tricky

Suppose your local museum offers:

$100 Individual Membership

Benefits include:

• free admission;
• discounted parking;
• priority ticket purchases; and
• member events.

Can your DAF pay the $100?

Potentially not.

DAF sponsors generally examine whether the membership provides the donor with more than an incidental benefit.

Fidelity identifies certain membership fees providing more than incidental benefits as impermissible.

Some minimal benefits may be acceptable depending on the sponsor and circumstances.

Federal charitable-contribution rules themselves recognize that certain low-value membership benefits can sometimes be disregarded for deduction purposes.

But DAF rules can be stricter.

Before using DAF funds for a membership, ask the sponsor.

Or use a cleaner approach:

Pay for the membership personally and make an additional unrestricted grant from the DAF.

College Athletic Funds Are Another Trap

Suppose you make a contribution to your university’s athletic fund.

In return, you receive priority rights to purchase season tickets.

That benefit creates a problem.

Fidelity Charitable specifically states that DAF grants cannot be used when the donor receives athletic-fund benefits such as the right to purchase sporting-event tickets.

You may still be able to make an unrestricted charitable grant to the university’s athletic program when no prohibited benefit is provided.

But if your payment earns you ticket priority, premium seating rights, parking, hospitality access, or another significant benefit, your DAF generally should not be used to obtain it.

You Cannot Pay Your Child’s School Tuition

Another common misconception involves schools.

Suppose your child attends a nonprofit private school.

The school is a 501(c)(3).

Can you pay tuition from your DAF?

No.

Tuition is a personal financial obligation.

It benefits a specific student and satisfies an expense you would otherwise have to pay personally.

Fidelity Charitable expressly prohibits DAF grants for the tuition and required fees of a specific individual selected by the donor or related party.

But you may potentially give to:

The school’s general scholarship fund

or:

The school’s annual fund

or:

The school’s building campaign.

Again, compare:

Pay my daughter’s $20,000 tuition: No.

Give $20,000 to a scholarship program serving qualifying students selected by the school: Potentially yes.

You Cannot Direct Money to a Particular Individual

Imagine a family in your community loses its home in a fire.

You want to help.

Can you recommend a $10,000 DAF grant directly to that family?

Generally, no.

DAFs generally cannot make grants directly to individuals. Fidelity lists individuals among ineligible grant recipients.

But there may be another solution.

A qualified community foundation, disaster-relief organization, church, or other public charity may have a program established to help families affected by emergencies.

You could potentially make a DAF grant to that charity.

The charity—not you—would then determine how qualifying assistance is distributed.

This distinction prevents a DAF from becoming a tax-deductible account for making personal gifts to friends and relatives.

What About GoFundMe?

Generally, a DAF cannot simply send money to an individual through a personal crowdfunding campaign.

A GoFundMe for someone’s medical bills, funeral expenses, lost wages, or personal hardship normally benefits a particular person rather than a qualifying public charity.

The fact that the situation is sympathetic does not automatically make the payment a charitable grant under federal tax law.

A campaign sponsored by a qualifying charitable organization may be different.

The important question is:

Who is legally receiving and controlling the money?

Not merely:

What website is collecting it?

Can a DAF Fulfill a Pledge?

Sometimes.

This area requires particular care.

Suppose you tell a university:

“I pledge $100,000 to the scholarship fund.”

If you have entered into a legally enforceable financial obligation, using your DAF to satisfy your personal debt can create problems.

Fidelity Charitable allows grants in support of non-legally binding pledges, but not to satisfy an enforceable financial obligation of the donor.

A safer formulation may be:

“I intend to recommend grants totaling $100,000 from my donor-advised fund.”

That wording can avoid creating the impression that you have personally undertaken a legally binding obligation.

Before signing a pledge agreement with a charity, decide whether the contribution will be made personally or through your DAF.

You Cannot Make Political Campaign Contributions

A DAF cannot be used as a tax-advantaged political campaign account.

Major DAF sponsors prohibit grants for political campaign activity.

That means you cannot use your DAF to contribute to:

• a candidate’s campaign;
• a political party;
• a PAC; or
• similar political campaign organizations.

Donor-advised funds are charitable vehicles—not political-contribution vehicles.

What About Lobbying?

This can be more nuanced.

Public charities may conduct some lobbying activity within the limits imposed by federal tax law.

But DAF sponsors typically restrict grants that are specifically earmarked for impermissible lobbying or political purposes.

Fidelity’s guidelines identify political contributions, campaigns, and lobbying among prohibited uses in certain contexts.

A general operating grant to an otherwise qualifying charity that happens to engage in some permissible advocacy is not necessarily the same thing as directing your DAF grant specifically toward lobbying.

When advocacy is the intended purpose of a grant, confirm the sponsor’s rules first.

Can You Give Internationally?

Possibly—but not always directly.

Some DAF sponsors generally restrict direct grants to foreign organizations unless specific procedures are followed.

Fidelity Charitable, for example, generally does not make ordinary grants directly to charities organized outside the United States, but donors may be able to recommend grants through qualifying U.S. intermediary charities that support international activities.

Other DAF sponsors may offer international grantmaking programs with additional due diligence and fees.

So if you want to support:

• a school in Africa;
• an animal rescue in Mexico;
• humanitarian relief in Ukraine;
• an overseas hospital; or
• an international environmental organization,

do not assume the grant is impossible.

Ask your DAF sponsor about its international-giving procedures.

The Simplest Test: Are You Getting Something Back?

When deciding whether a DAF can pay for something, ask:

Am I—or someone connected to me—receiving a meaningful financial or personal benefit because of this payment?

If the answer is yes, there may be a problem.

The Pension Protection Act rules prohibit DAF grants that confer more than an incidental benefit on a donor, donor advisor, family member, or other related person. Vanguard’s policies expressly reflect this restriction.

Think about the distinction this way:

Donation to museum: Yes.

Museum membership with valuable benefits: Maybe not.

Donation to university: Yes.

Contribution that earns football ticket priority: No.

Donation to school scholarship fund: Yes.

Your grandchild’s tuition: No.

Donation supporting gala: Yes.

Your gala ticket: No.

Donation to charity: Yes.

Buying an auction trip: No.

Donation to disaster-relief organization: Yes.

Check to a particular family: Generally no.

When in Doubt, Ask Before You Promise Anything

One advantage of using a donor-advised fund sponsor is that the sponsor reviews grant recommendations before distributing the money.

The sponsor technically owns and controls the charitable assets.

Your role is to recommend grants.

That means the sponsor can reject a proposed grant that would violate tax rules or its own policies.

That review can protect both the sponsoring charity and the donor.

But it is much better to ask before you promise money.

If a charity invites you to buy a table, sign a pledge agreement, purchase a membership, fund a scholarship, or sponsor an event, tell them:

“I intend to use my donor-advised fund. Is this payment eligible for a DAF grant?”

Then confirm the answer with your DAF sponsor.

Do not rely solely on the charity’s answer. The DAF sponsor ultimately determines whether it will approve the grant recommendation.

The Bottom Line

A donor-advised fund gives you tremendous flexibility over which charitable causes you support and when you support them.

But flexibility is not the same thing as personal ownership.

Once assets are contributed to a DAF, they are committed to charitable purposes.

A useful rule of thumb is:

If the money benefits the charity, it may be permissible.

If the payment satisfies your personal obligation or buys something for you, it probably is not.

That distinction is what allows donor-advised funds to receive favorable charitable tax treatment in the first place.

Used correctly, a DAF can support schools, hospitals, religious organizations, animal rescues, scholarships, capital projects, community organizations, medical research, disaster relief, arts organizations, and countless other charitable causes.

It can become a central part of a family’s charitable and estate-planning strategy.

Just remember:

Your DAF can be used to support the causes you love.

It just cannot be used to buy the things you want.

This article is for general informational and educational purposes only and does not constitute legal, tax, financial, or investment advice. Donor-advised fund sponsors may impose rules that are more restrictive than federal tax law, and policies differ among sponsoring organizations. Donors should confirm a proposed grant with their DAF sponsor and consult their legal and tax advisers when appropriate.