Giving to causes you care about is one of the most rewarding ways to use your wealth. But did you know that with the right strategies, charitable donations can also help you reduce taxes, support your financial goals, and create a lasting legacy? Whether you give regularly, plan to make a large gift, or want to incorporate philanthropy into your estate plan, thoughtful planning can make your generosity go further — for both the charities you support and your own financial picture.
Here are some of the most effective charitable giving strategies to consider:
1. Donate Appreciated Securities Instead of Cash
One of the most tax-efficient ways to give is by donating long-term appreciated assets — such as stocks, mutual funds, or ETFs — directly to a qualified charity.
Why it’s effective: You avoid paying capital gains taxes on the appreciation, and you can still deduct the full fair market value of the gift if you itemize deductions.
Example: If you bought stock for $5,000 and it’s now worth $15,000, donating it directly lets you deduct the full $15,000 and avoid capital gains tax on the $10,000 gain.
2. Use a Donor-Advised Fund (DAF)
A donor-advised fund acts like a charitable investment account. You contribute cash or assets to the DAF, receive an immediate tax deduction, and then recommend grants to your favorite charities over time.
Why it’s effective: A DAF allows you to “bunch” multiple years of giving into one tax year — which can help you exceed the standard deduction and maximize your tax savings.
Bonus: Your contributions can be invested for potential growth, allowing you to give even more in the future.
3. Qualified Charitable Distributions (QCDs) from IRAs
If you’re age 70½ or older, you can donate up to $105,000 per year (2025 limit) directly from your IRA to a qualified charity — known as a Qualified Charitable Distribution.
Why it’s effective: QCDs count toward your required minimum distribution (RMD) but are excluded from your taxable income, which can help lower your overall tax bill and reduce the impact on Medicare premiums and Social Security taxation.
4. “Bunch” Charitable Gifts for Greater Tax Impact
If your annual charitable giving plus other itemized deductions don’t exceed the standard deduction, you may not be receiving the full tax benefit of your gifts. One strategy is to “bunch” several years’ worth of donations into a single year.
Why it’s effective: By concentrating your giving, you’re more likely to itemize and capture a larger tax deduction in that year — and then take the standard deduction in subsequent years.
5. Include Charitable Giving in Your Estate Plan
Charitable gifts don’t have to stop during your lifetime. Including nonprofits in your will, trust, or beneficiary designations is a powerful way to create a legacy and reduce estate taxes.
Options to consider:
Bequests: Name a charity in your will or trust.
Charitable Remainder Trusts (CRTs): Provide income to loved ones first, with the remainder going to charity.
Charitable Lead Trusts (CLTs): Support a charity first, then pass the remaining assets to heirs, often with tax advantages.
6. Consider “Family Philanthropy”
Charitable giving can also be an opportunity to involve your children or grandchildren and instill shared values. Setting up a family foundation, using a donor-advised fund collaboratively, or simply making joint decisions about annual giving can turn generosity into a meaningful family tradition.
Final Thoughts: Align Giving With Your Goals
Charitable giving is about more than tax deductions — it’s a reflection of your values and a way to make a lasting difference. But when integrated into your broader financial plan, it can also be a powerful tool for reducing taxes, managing wealth, and creating a meaningful legacy.
If philanthropy is part of your vision for the future, consider talking with your financial advisor. Together, we can help you design a charitable giving strategy that’s not only impactful for the causes you care about but also aligned with your long-term financial goals.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.