Salvatore M. Capizzi, CEPA, CBDA, is Dunham's Chief of Sales & Marketing and a 2026 Wealthies CMO of the Year Finalist. His work focuses on retirement planning, emerging trends for financial advisors, and advanced tax, trust, and estate strategies.
Under the One Big Beautiful Bill Act (OBBBA), itemizing taxpayers face a 50-basis-point (0.5%) Adjusted Gross Income (AGI) floor on charitable deductions. Bunching multi-year contributions into a donor-advised fund (DAF) allows donors to absorb this non-deductible floor once rather than annually, preserving thousands in tax write-offs while maintaining consistent charitable grants.
Key Takeaways
The New Giving Floor: The OBBBA creates a 50-basis-point (0.5%) AGI floor on itemized charitable deductions, eliminating tax write-offs on the first slice of annual giving.
The Joseph 7:1 Storehouse Solution: Inspired by Genesis 41, bunching seven future years of giving alongside year-one donations into a donor-advised fund absorbs the non-deductible haircut once instead of eight times.
Compounding Tax Benefits: Funding the storehouse with appreciated long-term stock eliminates capital gains taxes while securing an upfront deduction, multiplying total client tax savings.
Our brilliant head of technology recently told me he took his wife to see Phantom of the Opera, and it got me thinking of all those wonderful Andrew Lloyd Webber plays.
One of his most memorable works is Joseph and the Amazing Technicolor Dreamcoat.
That got me thinking about the biblical story and why every financial advisor should consider it.
What Is the OBBBA Charitable Deduction Floor?
The One Big Beautiful Bill Act (OBBBA) of 2025 changed the rules of charitable giving, and this is the first year your clients are facing it.
You see, the OBBBA introduced a50-basis-point1 Adjusted Gross Income (AGI) floor on itemized charitable deductions. Under this provision, donors can deduct only the portion of their annual giving that exceeds 0.5% of their AGI.
For instance, what if your hypothetical married couple client’s AGI for 2026 is $400,000?
This means that if they itemize their deductions, the first $2,000 of their contribution is not deductible ($400,000 x 50 basis points).
Learning from Genesis 41: The 7-Year Storehouse Principle
In Genesis 41, Joseph told Pharaoh to store grain during the seven years of plenty so Egypt could eat during the seven years of famine.
What if we apply this seven-year principle to your client’s charitable contributions? In my view, for charitably inclined clients, this could be one of the most practical tax strategies to discuss in 2026.
Joseph’s strategy was simple, and so is this strategy. Joseph said to save seven years of grain and then systematically distribute it over the next seven years.
The Joseph Donor Advised Fund Strategy follows a similar concept.
How Does Charitable Bunching Into a DAF Work?
This is what I call the 7:1 Storehouse Strategy.
Its purpose is to offset this new OBBBA annual haircut. Instead of taking that $2,000 haircut every single year, your clients fund an entire eight-year giving cycle in one move: they make their Year 1 contribution directly andbunch3the next seven years into their donor-advised fund. They take the haircut once instead of eight times.
Here is how the 7:1 Storehouse Strategy creates an additional $5,040 cash refund for our hypothetical couple.
Let us assume they are in a 32% federal tax bracket and a 4% state income tax bracket.
The Inefficiency of Annual Giving
If your hypothetical client couple with $400,000 AGI gives $10,000 a year to their charities, under the OBBBA, their annual non-deductible floor is $2,000 ($400,000 x 50 basis points).
They donate $10,000 each year across eight years ($80,000 total).
The 0.5% AGI floor eliminates their deduction on the first $2,000 every single year.
Over eight years, $16,000 of their $80,000 in gifts becomes non-deductible, leaving only $64,000 in eligible deductions.
Using the 7:1 Storehouse Strategy
For a hypothetical couple with $400,000 of AGI who plans to give $10,000 annually for eight years, the potential difference is shown below.
Over Eight Years
Giving $10,000 Each Year
7:1 Storehouse Strategy
Total charitable contributions
$80,000
$80,000
Timing of charitable contributions
$10,000 each year for eight years
$80,000 contributed in year one, with $10,000 granted from the DAF each year
Times the 0.5% AGI floor applies
8
1
Total non-deductible amount from the 0.5% AGI floor
$16,000
$2,000
Potential charitable deduction
$64,000
$78,000
Potential additional deduction preserved
—
$14,000
Potential tax savings at a 36% combined rate
—
$5,040
In year one, they give their regular $10,000 to charity, which absorbs the initial $2,000 haircut.
At the same time, they put $70,000 into their Donor-Advised Fund to store the next seven years of giving.
That creates an immediate $78,000 charitable deduction in year one ($80,000 total contributed minus the single $2,000 floor).
Just like Joseph’s plan for Pharaoh, for the next seven years, their DAF systematically grants $10,000 annually to their chosen charities.
Because those future gifts flow out of the storehouse, they never hit the $2,000 annual haircut again during those seven years.
All potential earnings inside the donor-advised fund can grow tax-free, adding to the overall benefit.
By switching from piecemeal annual giving to the multi-year Joseph Donor Advised Fund Strategy, this couple recovers $14,000 in deductions they otherwise would have lost over the eight-year period. At their 36% combined federal and state tax rate, that keeps an extra $5,040 in their pockets instead of handing it to the IRS.
Why Fund a Donor-Advised Fund with Appreciated Stock?
Funding the Joseph Donor Advised Fund Strategy with appreciated assets rather than cash can make this strategy more interesting.
First, you avoid the OBBBA haircut for seven years of giving.
Second, transferring appreciated stock directly to the client’s donor-advised fund eliminates capital gains tax.
Third, neither the client nor the charity owes tax on the fund’s potential growth.
Let us run the numbers for our hypothetical couple.
In addition to the $5,040 in OBBBA tax savings we just discussed, let us assume that the $70,000 they use to fund their storehouse is not cash. It is a tech stock they bought years ago for $20,000.
If they were to sell that stock themselves to raise cash for their charity, they would be subject to a 15% federal capital gains tax plus a possible 4% state tax on their $50,000 profit. That is a $9,500 tax.
By transferring that stock directly into their Joseph Donor-Advised Fund, we eliminated the capital gains tax.
Combined with the haircut, that is $14,540 in tax savings.
Planning Charitable Distributions Ahead of Time
There is nothing complicated about the idea. If your client intends to give $10,000 every year anyway, why take the $2,000 haircut eight different times when you may be able to take it once?
And before your client writes an $80,000 check, look at what they own. If they have highly appreciated stock, that may be a much better asset to put into the storehouse.
Joseph understood something thousands of years ago that still makes sense today.
When you know what is coming, plan for it while you can.
Frequently Asked Questions About Donor-Advised Funds
Are donor-advised funds required to make an annual minimum distribution? No, current federal law does not require donor-advised funds to make an annual payout. Unlike private foundations that must pay out at least 5% each year, DAF assets can stay invested and grow tax-free over time. However, some sponsoring charities set internal rules that require you to make at least one grant every two to three years.
What complex or non-cash assets can be contributed to a DAF? Donors can fund a DAF with liquid cash, stocks, and mutual funds. Many programs also take complex gifts like private company shares, real estate, and partnership units. Giving these assets helps lower capital gains taxes. You will need sponsor approval and a formal appraisal before you finish the gift.
What are the AGI deduction limits for DAF contributions? Donors giving cash can deduct up to 60% of their adjusted gross income in the year of the gift. Contributions of appreciated stock or real estate held for more than one year are deductible up to 30% of your income while wiping out capital gains taxes. Any deduction above these yearly caps carries forward for up to five tax years.
Can donors make anonymous grants through a donor-advised fund? Yes, donors can keep their charitable gifts completely private through a donor-advised fund. When you recommend a grant, you can list your name, use only the fund name, or stay fully anonymous. Private foundations must name major donors on public tax filings. A DAF keeps your personal details off those public records.
Can a DAF make grants to international charities or impact investments? Yes, many modern DAF programs support both overseas giving and impact investing. Program sponsors check foreign groups to make sure they meet U.S. charity standards. Some platforms also let donors place money into mission-driven businesses or social projects. This allows your funds to do good work while you plan future grants.
Sources
Internal Revenue Service — Publication 526, Charitable Contributions [irs.gov]
Dunham — Donor-Advised Funds for Financial Advisors: Loyalty and Legacy[dunham.com]
Disclosure
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
A donor advised fund (“DAF”) is a separately identified account that is maintained and operated by a section 501(c)(3) organization and is not a registered investment company.
The Dunham DAF is powered by University Impact (“UI”), a registered 501(c)(3) nonprofit in the United States who manages the charitable aspects of the Dunham DAF.
UI charges fees to the Dunham DAF for administrative services in accordance with the Fee Schedule as outlined in Appendix A of the UI Donor Advised Fund Agreement (“Agreement”). Accounts are required to maintain a $1,000 minimum balance and are subject to support investment fees as explained in the Agreement. A list of current fees and initial gift minimums is available upon request. UI reserves the right to change its fee or minimum policies at any time. There may be additional fees charged by the Financial Advisor that are separate from UI’s administrative and impact investment fees.
Contributions to the Dunham DAF are irrevocable contributions made to UI, a public charity.
Assets contributed to the Dunham DAF (once liquidated, if applicable) will be invested in the Dunham Asset Allocation Program sponsored by Dunham & Associates Investment Counsel, Inc., a Registered Investment Adviser and Broker/ Dealer. Member FINRA/ SIPC. Dunham Trust Company and Dunham & Associates Investment Counsel, Inc. are affiliated entities.
All financial decisions and investments involve risk, including possible loss of principal. The market value of the Dunham Donor Advised Fund is not guaranteed by UI and may fluctuate depending upon investment results. Investors should carefully consider a fund’s investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.
Investment allocations may be changed according to Dunham’s standard policies and procedures. UI may hold up to 5% of the Dunham DAF assets in non-interest bearing cash at any time.
As the Program Sponsor, Dunham charges each donor a single service program fee (“Program Fee”) not exceeding 0.25%.
In addition, a Financial Advisor may charge a client/donor an asset-based advisory fee (“Advisory Fee”) as specified in the Advisory Agreement. Detailed advisory and expense fee information about the Dunham Asset Allocation Program is available in the Wrap Fee Program Brochure available upon request.
As investment adviser to the Dunham Funds, Dunham receives the investment advisory compensation described in the Dunham Funds’ prospectuses and such fees are borne by all shareholders in the Dunham Funds, including the donor.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc., Trust services offered through Dunham Trust, an affiliated entity. Dunham Private Trust is the Wyoming division of Dunham Trust.
