DAFs vs. QCDs: Why This Common Confusion Can Cost You
- Mitch Stein
- Jun 2
- 3 min read
How to Identify, Code, and Receipt These Gift Types the Right Way
At first glance, Donor Advised Funds (DAFs) and Qualified Charitable Distributions (QCDs) might look similar. They’re both common giving vehicles, often arrive by check, and frequently involve major financial institutions. But behind the scenes, they are fundamentally different—and treating them the same in your donor data or gift processing can cause compliance headaches, missed stewardship opportunities, and incorrect receipting.
Let’s break down how they work, how they’re similar, and—most importantly—how to distinguish them correctly.
The Basics: What Are DAFs and QCDs?
Donor Advised Fund (DAF)
Think of a DAF as a tax-advantaged charitable savings account—like a 401(k) or HSA, but for philanthropy. Donors contribute to the fund, receive an immediate tax deduction, and then recommend grants to nonprofits over time. Importantly, the money is controlled by the DAF provider (a 501(c)(3) organization).
Check out this easy one-pager that explains DAFs to any Donor!
Qualified Charitable Distribution (QCD)
QCDs are direct gifts from an individual’s IRA (Individual Retirement Account) to a nonprofit. Once an account holder turns 70½, they can use QCDs to fulfill required minimum distributions (RMDs) while reducing their taxable income. The donor never takes possession of the funds—they go straight to the nonprofit.
Why They Get Confused
Here’s what trips up many gift processors:
They’re both three-letter acronyms. And confusing ones at that.
They often come in the mail as checks.
They may list a familiar financial institution—like Fidelity or Schwab—but that’s where the similarities end.
Key Differences: What to Look For
Feature | DAF | QCD |
Who owns the funds? | DAF provider (e.g. Fidelity Charitable) | The individual IRA holder |
Tax treatment? | No new deduction when granting from a DAF | Tax-deductible at time of distribution |
Use of funds? | Irrevocably committed to philanthropy | Can also be used for personal expenses (with taxes) |
Who’s the legal donor? | The DAF provider | The IRA account holder |
Stewardship focus | Soft credit to fund advisor (the real donor) | Full credit and receipting to IRA holder |
How to Identify a DAF vs. a QCD
One of the best tips? Look at the name on the check:
If it says “Charitable,” “Foundation,” or “Donor Advised Fund” — it’s likely not a QCD.
Important to note there are other non-DAF entities that will use this terminology - especially crowdfunding platforms and employee giving. See this guide for more details on how to manage those challenges.
If it just says Fidelity Investments, Schwab, Vanguard, etc. — it may be a QCD.
How to Code Each Gift Type
QCD:
Hard Credit: Donor’s name
Gift Type: QCD
Note Field: Financial Institution Name (e.g. Fidelity Investments)
DAF:
Hard Credit: DAF Provider (e.g. Fidelity Charitable)
Soft Credit: Donor’s name
Gift Type: DAF
Note Field: Fund Name (e.g. Smith Family Fund)
How to Receipt and Acknowledge
QCD:
Send a tax receipt to the donor
Send a thank you to the donor
DAF:
Do not send a tax receipt (the deduction was taken when the DAF was funded)
Send a thank you to the donor
Do not send anything to the DAF provider
Note: There is one exception to this last point. If it’s unclear who the specific donor is, sending a tailored & personalized thank you to the DAF Provider will often get forwarded. Detailed in this DAF Provider discussion recap.
Final Thought: Don’t Let the Details Slide
DAFs and QCDs are powerful giving vehicles—but they come with unique rules, and mixing them up can lead to donor confusion and IRS complications. Take the time to track them separately, code them correctly, and educate your team. Otherwise you’ll miss the chance to evaluate your fundraising accurately, plan around these growing channels strategically and expose the organization to significant reporting and audit risks.
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