As we gather around the Thanksgiving table this November, many of us naturally think about giving back. Whether you’re planning year-end donations or looking to make charitable giving a bigger part of your financial plan, a little strategy can help you maximize your impact while also optimizing your tax situation.
Here are some smart approaches to consider:
1. Donate Appreciated Securities Instead of Cash
If you’ve held stocks, mutual funds, or ETFs for more than a year and they’ve increased in value, donating them directly to charity can be more tax-efficient than selling them and donating cash. You can potentially deduct the full fair market value and avoid paying capital gains tax on the appreciation. It’s a win-win: more goes to charity, and you get a larger tax benefit.
2. Consider a Donor-Advised Fund (DAF)
A donor-advised fund lets you make a charitable contribution, receive an immediate tax deduction, and then recommend grants to charities over time. This is particularly useful if you want to “bunch” multiple years of charitable giving into one year to exceed the standard deduction threshold, or if you received a windfall (like a bonus or stock options) and want to lock in the deduction now while deciding on recipients later.
3. Qualified Charitable Distributions (QCDs) for Those 70½ and Older
If you’re 70½ or older, you can donate up to $105,000 (for 2025) directly from your IRA to a qualified charity through a QCD. This amount counts toward your required minimum distribution (RMD) but isn’t included in your taxable income. For retirees who don’t itemize deductions, this can be more valuable than a standard charitable deduction.
4. Bunch Your Donations
With the standard deduction at $15,000 for single filers and $30,000 for married couples filing jointly in 2025, many taxpayers don’t itemize. If you’re close to the threshold, consider “bunching” two or three years’ worth of charitable donations into one year to itemize, then taking the standard deduction in other years.
5. Don’t Forget About Documentation
For any donation of $250 or more, you’ll need a written acknowledgment from the charity. For non-cash donations over $500, you’ll need to file Form 8283 with your tax return. If you’re donating property valued over $5,000, you’ll generally need a qualified appraisal. Keep good records throughout the year to make tax time easier.
6. Time Your Donations Strategically
Charitable contributions are deductible in the year they’re made. If you want to claim a deduction for 2025, make sure your donation is postmarked or charged to your credit card by December 31, 2025. Online donations count on the date they’re processed, not when the charity receives the funds.
7. Involve Your Family
The holiday season is a great time to discuss charitable values with family members. Consider involving children or grandchildren in the decision-making process for charitable gifts, or explore ways to make giving a multi-generational family tradition.
The Bottom Line
Charitable giving is ultimately about supporting causes you care about, but being strategic about how you give can amplify your impact. As you plan your year-end giving this November, consider which of these strategies might work best for your situation.
Every financial situation is unique, so it’s worth discussing your specific charitable giving strategy with your financial advisor and tax professional.
