How do I enter a Donor Advised Fund (DAF)?

A Donor-Advised Fund (DAF) is a charitable giving vehicle that allows individuals, families, or organizations to donate assets to a public charity and recommend how those funds should be distributed to other nonprofit organizations over time. You open a DAF account with a sponsoring organization — typically a public charity, community foundation, or financial institution’s charitable arm and then donate money or assets (such as cash, stocks, real estate, or other investments) to the fund. This donation is irrevocable, meaning once given, it belongs to the charity sponsoring the DAF.

For an Income Lab plan, one of the most important parts of DAF planning is that the donor receives an immediate tax deduction for the donation, even though grants to charities might be made later. (And, if you donate appreciated assets, you can avoid capital gains taxes on the appreciation.) Income Lab automatically handles the tax-deductible aspects of charitable giving, including DAFs. This automatic handling includes the 5-year carryforward of unused deductions.

To enter the funding of a DAF, make an Other/Variable Expense (the example below is a one-time/lump sum expense), categorize it as “Charity”, and be sure to check "Expense is tax-deductible.

It is important to note that Income Lab treats all deductible charitable donations as cash contributions to public charities (subject to a 60% AGI limit).

If you would also like to include the DAF itself in the plan, you can create it as an investment account and uncheck the “Include account in income plan calculations” box. (This is a good way to include any accounts, irrevocable trusts, etc., that are part of the household's world but are not going to be used to fund retirement.)

Even though the DAF is not part of the retirement plan, you can still include savings/contributions into the account (which will increase the growth of the account balance) as well as account-level distribution plans from the account (which will show the account being drawn down). You won't see distributions from this type of account included in Life Hub or other views as “Income” because we don't want those non-retirement-related distributions confused with distributions that the household can spend.