Making the most of your charitable giving

Supporting a charitable organization can be a rewarding experience in more ways than one: Not only does it offer the sense of personal satisfaction that comes with helping others, it can also offer tax advantages for you and your heirs.

To encourage philanthropy, the IRS currently offers several tax incentives to help make the most of every dollar you contribute to a worthy cause. It’s a win-win proposition for you, your heirs and the qualified charitable organizations you support.

However, the tax laws that govern charitable contributions in the United States can be complex. Tax obligations are influenced by your personal tax situation, the type of assets you donate, how the gift is structured, the type of charity you support and a few other variables. Recent changes to federal tax law have also created new planning opportunities for both taxpayers who itemize deductions and those who claim the standard deduction, making it worthwhile to revisit charitable giving strategies.

Deciding how much to give and which charities to support

Below are the key questions people should ask themselves as they begin to create a charitable giving plan. While answers vary greatly depending on each person’s unique preferences and situation, several key considerations come into play:

• What are my specific charitable goals and values?
• How involved would I like to be in seeing those goals fulfilled?
• Do I intend to give during my lifetime, leave assets to charity at my death, or both?
• What are my wealth transfer goals for future generations?
• Will my estate be subject to the federal or state estate tax at death?
• How do I mitigate the income tax effects from the sale of a property or other significant receipt of income?

Charitable giving strategies can range from simple, one-time contributions to complex, multi-generational plans.

Although many people include bequests in their wills or revocable trusts, giving directly to charity during your lifetime has many gratifying aspects as well. And, as a bonus, it can also provide more tax benefits. Here are a few giving strategies to consider:

1. Give cash outright

Consider if you:

• Want a quick and convenient way to donate
• Are in a high-income tax bracket

For many individuals, a lifetime of charitable giving begins with simple outright cash gifts. 

Making a cash contribution is one of the most straightforward ways to support a charity, and may provide tax benefits in the year the donation is made. If you itemize deductions, your charitable contributions can reduce your taxable income for the year, including ordinary income and capital gains.

Generally, cash donations to public charities are deductible up to 60% of your adjusted gross income (AGI), while contributions to most private nonoperating foundations are generally deductible up to 30% of your AGI.

Beginning in 2026, taxpayers who itemize deductions may deduct charitable contributions only to the extent their qualifying gifts exceed 0.5% of their contribution base, generally AGI. If your deductible contributions exceed the applicable AGI limits, you may generally carry the excess forward for up to five tax years. However, amounts disallowed solely because of the new 0.5% threshold generally are not eligible for the five-year carryforward.

Taxpayers who claim the standard deduction may also qualify for a charitable deduction of up to $1,000 for single filers or $2,000 for married couples filing jointly for certain qualifying cash gifts. Contributions to donor-advised funds and certain private foundations do not qualify for this deduction.

According to the IRS, you can deduct contributions of $250 or more only if you have written acknowledgement from the charitable organization. Be sure to keep a record of your contributions and provide them to your accountant at tax time.

Similarly, if your estate may be subject to federal or state estate tax at death, the gift helps to reduce the value of your estate and may save taxes at your death as well. State treatment varies by jurisdiction.

2. Donate appreciated assets instead of cash

Consider if you:

• Have appreciated assets held for more than a year
• Want to avoid capital gains taxes on assets you otherwise may sell

If you have significant unrealized gains in your investment portfolio, consider gifting these assets to charity rather than donating cash. This approach can result in a much larger benefit than selling the assets and donating the proceeds.

In general, if you donate long-term appreciated assets to a public charity, you may be able to claim the full fair market value of the donated asset as an income tax deduction (up to 30% of your AGI for assets donated to public charities and 20% for assets donated to private foundations), even if the initial cost of the asset was much lower. And you can avoid capital gains tax that would otherwise have been due if you sold the asset. The charity is not subject to tax upon receiving the asset, so it can sell the assets and receive 100% of the value.

Appreciated assets may include stocks, bonds, mutual fund shares and other securities. Under some circumstances, donors may also consider more complex assets, such as restricted stock, shares of privately owned businesses, real estate or certain life insurance policies. You may carry forward contributions that exceed your AGI limits for up to five tax years. However, amounts disallowed solely because of the new 0.5% threshold generally are not eligible for the five-year carryforward.

A note about special rules for donating tangible personal property: If you are donating tangible personal property such as artwork or other collectibles, you will need an independent qualified appraisal of any gift valued at more than $5,000 and, as required for any non-cash gifts over $500, you will be required to file IRS Form 8283 with your tax return. For artwork valued at $50,000 or more, consider asking the IRS for a Statement of Value before making the claim.

3. Transfer retirement account distributions directly to charity

Consider if you:

• Are age 70½ or older and own an IRA
• Do not need the distributions and want to eliminate the income taxes from the distributions

If you are age 70½ or older and own an Individual Retirement Account (IRA), you may be able to transfer up to $111,000 (annual indexed QCD limit) in 2026 directly to qualified charities through a Qualified Charitable Distribution (QCD).

To make a QCD, ask your IRA custodian to send your distribution directly to the charity of your choice.

Although no separate charitable income tax deduction is allowed, the distribution may be used to satisfy all or a portion of your required minimum distribution and is excluded from gross income.  Donor-advised funds and supporting organizations generally are not eligible recipients.

Special rules may apply if you make deductible traditional IRA contributions after becoming eligible to make QCDs. Consult your tax advisor regarding the impact on future QCDs.

QCDs can be especially valuable for taxpayers who do not itemize deductions because the distribution is excluded from taxable income rather than relying on a separate charitable deduction.

4. Use a Donor Advised Fund

Consider if you:

• Want to reduce the tax burden of unusually high taxable income in a given year
• Want an easy-to-setup and convenient, low-cost giving vehicle
• Want additional time to consider which organizations or charitable goals to support

Donor Advised Funds (DAFs) allow you to put money aside for charity today and distribute it to charitable organizations sometime in the future. This approach offers immediate tax benefits while you decide which organizations you will eventually support.

A DAF is a particularly attractive option to consider in a year when you have realized a large amount of capital gains or have significant additional income. A contribution may qualify for a current federal income tax deduction (subject to applicable limitations and substantiation requirements), while giving you more time to select a specific charitable organization you wish to support and providing an opportunity for the assets to grow within the fund. The new 0.5% AGI threshold for itemized charitable deductions may also make "bunching" multiple years of charitable gifts into a single tax year even more beneficial for some taxpayers.

Most DAFs will provide the following features:

• Donate cash, appreciated assets, or sometimes illiquid assets
• Minimal cost and time commitment to open the account
• Relatively low initial contribution minimum
• Receive an immediate federal income tax deduction with each contribution to the fund
• No capital gains tax on the appreciated value of securities contributed
• Assets grow tax free
• Streamlined grantmaking to 501(c)(3) public charities
• Family members can be added as current or future advisors to the fund

Keep in mind that contributions to donor-advised funds generally do not qualify for the limited charitable deduction available to taxpayers who claim the standard deduction.

5. Designate a charity as the beneficiary of your retirement account assets

Consider if you: 

• Intend to leave funds to charity at your death
• Have retirement assets
• Want to minimize income taxes imposed on both your heirs and your estate

If you plan to leave money to charity as part of your estate plan, it is almost always better for your heirs if you use your retirement assets to fulfill the gifts before gifting your non-retirement assets. 

The contributions you make to a qualified retirement plan, such as an IRA or 401(k), are tax-deferred, so your heirs will typically pay income taxes on any money they withdraw from the account after they inherit it from you. In addition, many non-spouse beneficiaries are generally required to distribute inherited retirement accounts within 10 years, which can accelerate income taxes and reduce the after-tax value they ultimately receive.

Likewise, if your estate is valued above the estate tax exemption amount, these assets may only reach your beneficiaries after being subject to estate tax. Ultimately, this means your heirs may receive less than the full value of your retirement accounts, depending on their tax brackets and your estate tax situation. 

In stark contrast, a charity is not subject to income or estate tax and will receive 100% of the retirement assets.

6. Establish a Charitable Remainder Trust

Consider if you:

• Would like to retain a stream of income from your donation
• Own assets that have appreciated significantly and you are planning to sell
• Are comfortable with an irrevocable trust

Charitable Remainder Trusts (CRTs) allow you to give funds to charity while retaining a stream of income for yourself or other individual beneficiaries—potentially for the rest of your or their lifetimes. At the end of the trust term, the remaining assets go to charities you designate.

Contributions to CRTs can qualify for an income tax deduction based on the present value of the remainder interest going to charity. Payments to beneficiaries may carry ordinary income and capital gain under the statutory tier rules.

Although irrevocable, CRTs offer flexibility: You decide how the trust is designed, including the payout rate and the lifespan of the trust (subject to IRS limits), as well as the ultimate charitable beneficiaries. You can also reserve the right to change the charitable beneficiaries down the road.

7. Establish a Charitable Lead Trust

Consider if you:

• Want to support a charity now and leave remaining assets to heirs
• Do not need an additional income stream
• Have a taxable estate, appreciating assets or substantial wealth-transfer planning goals
• Are comfortable with an irrevocable trust

A Charitable Lead Trust (CLT) is often considered the opposite of a CRT because the specified charity receives the initial stream of income, while your heirs receive the amount that is left at the end of the trust’s term. It can be created during your lifetime or as part of an estate plan.

CLTs can be structured to provide the donor with an up-front charitable deduction as well as attractive gift and estate tax benefits. In a properly structured charitable lead annuity trust, appreciation above the IRC §7520 valuation rate may pass to the remainder beneficiaries without additional gift tax.

8. Create a private foundation

Consider if you:

• Are interested in establishing a longer-term legacy of charitable giving
• Want direct family involvement in the grant-making process
• Are subject to federal estate tax
• Are comfortable with start-up costs and ongoing administrative, compliance and legal fees

A private foundation is a powerful tool to convert your family’s values into financial and institutional support for your charitable goals. Private foundations can bring a family together around meaningful goals and shared values, while creating a lasting legacy.

If you are prepared to create and operate your own charitable entity, your foundation can create a more visible platform for your grantmaking. It can also be a means to bring your family and others together around selecting grant recipients and overseeing the operations of the organization.

Unlike gifts to a DAF or other public charities, gifts to private foundations are subject to lower income tax deduction limits (up to 30% of AGI for cash and 20% of AGI for appreciated securities). However, assets held in a private foundation may continue to grow within a charitable structure, subject to applicable excise taxes and regulatory requirements. Private foundations are also subject to a 1.39% federal excise tax on their net investment income.

Private foundations are required to distribute at least 5% of the value of assets each year for charitable purposes, subject to certain statutory adjustments and exclusions. They are also subject to strict rules related to self-dealing, jeopardizing investments and excess business holdings.

Regardless of which charitable giving strategy or strategies you are considering, we recommend speaking with our team of specialized experts who can guide you and your family in supporting the charitable causes you care about most, while also offering guidance on the most tax-efficient way of giving to those organizations.