Smart Year-End Charitable Giving: How to Give More and Save on Taxes

As the year winds down, many people start thinking about charitable giving—both out of generosity and with an eye on their tax bill. Thoughtful planning in November and December can help you support the causes you care about and make the most of current tax rules.

Below are some of the most effective strategies we discuss with clients when they ask, “What’s the best way to give at year end?”

Quick note: This article is for general education and is not tax or legal advice. Everyone’s situation is different—talk with your tax advisor before acting on any strategy.

1. Decide why you’re giving (then match the strategy to your goals)

Before we even talk about deductions, we encourage clients to start with a few questions:

• What causes matter most to you? Local, national, faith-based, education, health, environment, etc.
• How consistent do you want your giving to be? (One-time gifts vs. a long-term giving plan.)
• Is tax savings important, or just a bonus?

Once your “why” is clear, we can help pick the right how—cash, stock, donor-advised fund, IRA distributions, or a combination.

2. Cash is simple—but not always the most tax-efficient

Writing a check or making an online donation is the most straightforward approach and is often the right choice for smaller gifts.

However, from a tax standpoint:

• You generally need to itemize deductions to claim a charitable deduction.
• Many households now use the standard deduction, which means their charitable cash giving may not reduce their taxes at all.
• There are annual limits on how much you can deduct relative to your income, depending on the type of gift and the charity.

If you typically do not itemize, consider the next few strategies, which can sometimes create larger tax benefits from the same dollars given.

3. Donate appreciated investments instead of cash

One of the most powerful strategies we see at year-end is donating appreciated securities (stocks, ETFs, mutual funds) that you’ve held for more than one year.

Why it can be so effective:

• You avoid paying capital gains tax on the appreciation.
• You can generally deduct the full fair market value of the security (subject to IRS limits), if you itemize.
• The charity receives the full value—no tax haircut.

Example:
You bought a stock for $5,000 that’s now worth $15,000. If you sold it, you might owe capital gains tax on the $10,000 gain. If instead you donate the shares directly to a qualified charity or donor-advised fund, you:

• Avoid capital gains tax on the $10,000 gain, and
• Potentially deduct the full $15,000 if you itemize.

This strategy is especially attractive if you:

• Have concentrated positions in a single stock or fund
• Want to rebalance your portfolio
• Are already planning to give to charity this year

4. Use a donor-advised fund (DAF) to “bunch” your giving

A donor-advised fund (DAF) is like a charitable investment account:

1. You contribute cash or appreciated securities to the DAF.
2. You get a tax deduction in the year of the contribution (if you itemize).
3. The money can be invested and grow tax-free inside the DAF.
4. You recommend grants from the DAF to charities over time—on your own schedule.

This works especially well with a “bunching” strategy:

• In one year, you make a larger than usual contribution to the DAF (for example, a few years’ worth of giving at once).
• That big contribution may push your total deductions high enough to itemize in that year.
• In other years, you might simply take the standard deduction, but still direct dollars to charities from your DAF.

The result:
You may increase your total tax benefits over several years, while keeping your actual giving to charities smooth and predictable.

5. Use Qualified Charitable Distributions (QCDs) from IRAs (for those 70½+)

If you’re age 70½ or older and have an IRA, Qualified Charitable Distributions (QCDs) can be one of the most tax-efficient ways to give.

A QCD allows you to:

• Transfer up to a certain annual limit directly from your IRA to a qualifying charity.
• Have that amount excluded from your taxable income, rather than taken as an itemized deduction.
• Count the gift toward your Required Minimum Distribution (RMD) once you’re of RMD age.

Why this can be powerful:

• Reducing your taxable IRA income can help lower your overall tax liability, and in some cases:
  • Reduce the taxation of Social Security benefits
  • Lower Medicare premium surcharges (IRMAA)
• You get a tax benefit even if you do not itemize deductions.

Important points:

• The distribution must go directly from the IRA to the charity—not to you first.
• QCDs cannot go to donor-advised funds, private foundations, or certain other entities.
• Your IRA custodian will have specific forms or procedures to set this up.

For many retirees who are charitably inclined, QCDs are often the first strategy we look at each year.

6. Give strategically during high-income years

If you expect a higher-than-usual income year (for example, from a bonus, business sale, stock vesting, or Roth conversion), it can be an ideal time to:

• Make larger charitable gifts,
• Fund a donor-advised fund with appreciated securities, or
• Start multi-year charitable plans (such as ongoing DAF grants or recurring QCDs).

Because your marginal tax rate may be higher, the value of the deduction may also be higher, making those “big giving years” especially efficient.

7. Keep good records and check that charities are qualified

The IRS expects documentation for charitable deductions, especially for larger gifts.

Best practices:

• Get a written acknowledgment from the charity for any gift of $250 or more.
• For non-cash gifts over certain thresholds, you may need appraisals or additional forms.
• Verify that the organization is a qualified public charity or other tax-exempt entity recognized by the IRS.

Most major charities will provide appropriate documentation automatically, but it’s wise to keep your own copies and share them with your tax preparer.

8. Common mistakes to avoid at year end

A few pitfalls we see:

• Waiting until the last minute to transfer securities or set up QCDs (these can take time to process).
• Selling appreciated securities and then donating the cash, rather than donating the shares directly.
• Forgetting to coordinate giving with RMDs, leading to higher taxable income than necessary.
• Assuming every charitable organization is automatically tax-deductible (some are not).

A quick planning conversation can help avoid these issues and keep your giving aligned with both your heart and your financial plan.

9. Why 2025 may be a uniquely good year to give (before the new 0.5% limit)

There’s a new wrinkle coming for charitable deductions that makes 2025 an especially important year for many donors to review their giving plans.

Beginning with the 2026 tax year, a new federal rule will apply a 0.5% “floor” based on your adjusted gross income (AGI) for itemized charitable deductions. In plain English, that means:

• Only the portion of your total annual charitable giving that exceeds 0.5% of your AGI will be deductible if you itemize.
• The first 0.5% of AGI you give each year won’t generate any federal charitable deduction (though it’s still charitable, of course).

Example:
If your AGI is $200,000 and you give $5,000 to qualified charities in 2026:

• 0.5% of AGI = $1,000
• Only $4,000 of your giving would be deductible; the first $1,000 would not.

For many households who already itemize, this change slightly reduces the tax benefit of “routine” or modest annual giving starting in 2026. For larger givers and higher-income taxpayers, it can meaningfully reduce the overall tax value of their charitable contributions.

Why that points to giving more in 2025

Because this new 0.5% floor doesn’t apply until 2026, gifts made in 2025 are still subject to current, more favorable rules:

• There is no 0.5% AGI floor yet—every deductible dollar of giving can still potentially count, subject to the usual percentage-of-AGI limits and itemizing rules.
• If you are already considering larger gifts, funding a donor-advised fund, or “bunching” several years of gifts into one year, accelerating part of that plan into 2025 may increase your overall tax benefit.

In practical terms, 2025 may be the last “clean” year before the new 0.5% limit kicks in. That makes it a good time to:

• Revisit your multi-year charitable goals
• Decide whether to pull some future giving forward into 2025
• Coordinate with your CPA to see how much giving in 2025 could make sense in light of your income, itemized deductions, and upcoming changes

How we help clients with year-end giving

As a fiduciary RIA, we help clients:

• Clarify their values and giving priorities
• Determine whether they’ll itemize or take the standard deduction
• Identify which accounts and assets are best suited for charitable gifts
• Coordinate charitable strategies with retirement income, RMDs, and investment management
• Work closely with their CPAs and estate attorneys to ensure everything fits into a broader tax and estate plan

Year-end is a natural time to revisit your charitable plan—but we see the best results when giving is integrated into your financial life year-round, not just in December.

Ready to talk about your year-end giving?

If you’d like help evaluating your options—whether it’s cash gifts, appreciated securities, donor-advised funds, QCDs, or a mix of strategies—we’re here to help. If you would like one of our advisors to contact you to discuss your charitable giving or any other financial matters you can input your information here. 

Disclaimer: This material is for informational purposes only and is not tax, legal, or investment advice. Tax laws are subject to change, and their application can vary based on individual circumstances. Please consult your tax professional and/or attorney regarding your specific situation.

Disclosure: The information provided in this blog post is for educational and informational purposes only and should not be construed as financial advice. While we strive to present accurate and up-to-date information, the financial, tax, and legal landscape is subject to change, and individual circumstances vary. Readers are encouraged to consult with a qualified financial advisor or professional before making any financial decisions or implementing strategies discussed in this post. Our firm does not guarantee the accuracy, completeness, or suitability of the information provided, and we disclaim any liability for any direct or indirect damages arising from the use of this information. Artificial Intelligence may have been used to assist in the writing of this article. Past performance is not indicative of future results. Any investment involves risk, and individuals should carefully consider their financial situation and risk tolerance before making any investment decisions.