How to Give with Purpose and Potential Tax Benefits
For many families, charitable giving is not just about writing a check at the end of the year. It is about supporting the organizations, causes, communities, churches, schools, hospitals, and nonprofits that have meaning in their lives.
But when charitable giving is done with planning, it can become even more powerful.
The right strategy may allow you to give more intentionally, reduce taxes, avoid unnecessary capital gains, create a family legacy, and coordinate your giving with your broader financial plan.
This does not mean every charitable gift needs to be complicated. Sometimes, the best gift is simply writing a check to an organization you care about. But for people who give consistently, own appreciated investments, are approaching retirement, have required minimum distributions, or want to create a long-term giving strategy, there may be better ways to give.
Why Charitable Giving Should Be Part of a Financial Plan
Most people think about charitable giving emotionally first. They want to help. They want to support a cause. They want to honor someone. They want to make an impact.
That should always be the starting point.
But after the “why” is clear, the next question becomes: What is the most efficient way to give?
A good charitable giving strategy can help answer questions like:
- How much can I afford to give?
- Should I give cash, stock, or retirement assets?
- Should I give this year or spread gifts out over time?
- Can I receive a tax deduction?
- Would a donor-advised fund make sense?
- Should I use my IRA for charitable gifts?
- How do I involve my children or family in giving?
These are financial planning questions, not just tax questions.
The Tax Side of Charitable Giving
Charitable contributions may provide a tax benefit, but not every donation automatically creates one.
Generally, charitable contributions are deductible only when made to qualified charitable
organizations. Gifts to individuals are not deductible. The IRS also notes that taxpayers usually need to itemize deductions to receive a charitable deduction, although beginning in tax year 2026, non-
itemizers may deduct up to $1,000 of qualifying cash contributions, or up to $2,000 for married couples filing jointly.
This matters because many taxpayers take the standard deduction. For 2026, the IRS lists the standard deduction at $16,100 for single filers, $32,200 for married couples filing jointly, and
$24,150 for heads of household.
Because of this, a family may give generously but still receive little or no additional tax benefit if their total itemized deductions do not exceed the standard deduction.
That is where planning comes in.
Strategy 1: Bunching Charitable Gifts
One common charitable planning strategy is called bunching.
Instead of giving the same amount every year, a donor may combine multiple years of charitable gifts into one tax year. The goal is to make itemized deductions high enough in that year to exceed the standard deduction.
For example, assume a married couple normally gives $10,000 per year to charity. If they take the standard deduction every year, they may not receive much additional tax benefit from those annual gifts.
Instead, they may decide to give three years’ worth of donations, or $30,000, in one year. That larger gift may help them itemize deductions for that year. Then, in the following years, they may go back
to using the standard deduction.
The charity still receives support, but the donor may create a more meaningful tax result.
Strategy 2: Donating Appreciated Investments
One of the most overlooked charitable giving strategies is donating appreciated investments instead of cash.
Assume someone owns stock or mutual funds that have increased significantly in value. If they sell the investment first, they may owe capital gains tax. But if they donate the appreciated investment directly to a qualified charity or donor-advised fund, they may be able to avoid the capital gain and potentially receive a charitable deduction for the fair market value of the donated asset, subject to IRS limits.
This can be much more efficient than selling the investment, paying the tax, and donating the remaining cash.
This strategy is especially useful for people who:
- Have concentrated stock positions
- Own highly appreciated mutual funds or ETFs
- Want to rebalance a taxable investment account
- Have a large capital gain year
- Want to support charity without using cash flow
The tax deduction for gifts of appreciated non-cash assets is generally subject to AGI limitations. For example, long-term appreciated assets are commonly limited to 30% of adjusted gross income, while cash gifts to public charities may be deductible up to 60% of AGI. Excess deductions may generally be carried forward for up to five years.
Strategy 3: Donor-Advised Funds
A donor-advised fund, often called a DAF, is one of the most flexible charitable giving tools available.
A donor-advised fund allows you to make a charitable contribution now, potentially receive a tax deduction in the year of the contribution, and then recommend grants to charities over time.
Think of it as a charitable account.
You contribute money or appreciated investments into the donor-advised fund. Once the assets are contributed, they are no longer yours personally. They are set aside for charitable purposes. But you can recommend when and where grants are made to qualified charities.
This can be useful when someone has a high-income year, sells a business, sells real estate,
receives a large bonus, exercises stock options, or wants to bunch several years of giving into one tax year.
Example
A couple usually gives $15,000 per year to charity. They recently sold a business and are in a higher tax bracket this year.
Instead of giving $15,000 this year, they contribute $75,000 to a donor-advised fund. This represents five years of charitable giving.
They may receive a charitable deduction in the year of the contribution, subject to tax limits. Then, over the next five years, they can recommend grants from the donor-advised fund to their church, local nonprofits, universities, medical charities, or other qualified organizations.
This allows them to separate the tax planning decision from the charitable giving decision.
They do not have to rush to choose every charity before year-end. They can fund the donor-advised fund now and make grant recommendations over time.
Strategy 4: Qualified Charitable Distributions From an IRA
For retirees, one of the most powerful charitable giving strategies is the Qualified Charitable Distribution, or QCD.
A QCD allows someone age 70½ or older to transfer money directly from an IRA to a qualified
charity. The distribution may count toward the person’s required minimum distribution, but it is generally excluded from taxable income. The current 2026 QCD limit at $111,000 per individual.
This can be very helpful because reducing taxable IRA income may also help with other retirement tax issues, including Social Security taxation, Medicare IRMAA brackets, and overall taxable
income.
A QCD can be especially useful for someone who:
- Is over age 70½
- Takes required minimum distributions
- Gives to charity every year
- Does not itemize deductions
- Wants to reduce taxable IRA income
- Has more IRA income than they need for living expenses
One important planning note: QCDs generally must go directly from the IRA custodian to the qualified charity. They also generally cannot be made to donor-advised funds.
Strategy 5: Charitable Giving During High-Income Years
Some years are better than others for charitable giving.
A high-income year may create an opportunity to give more efficiently. This could happen when someone:
- Sells a business
- Receives a large bonus
- Exercises stock options
- Sells appreciated real estate
- Completes a Roth conversion
- Receives a large taxable distribution
- Has unusually high investment income
In those years, charitable giving may help offset some taxable income, depending on the type of gift, the organization receiving it, and the taxpayer’s overall deduction limits.
This is where donor-advised funds and appreciated asset donations can be especially useful.
Strategy 6: Leaving Money to Charity at Death
Charitable giving can also be part of an estate plan.
For many families, retirement accounts are among the most tax-sensitive assets to leave to heirs. Traditional IRAs and pre-tax retirement accounts can create taxable income for beneficiaries when inherited.
Because charities do not pay income tax in the same way individuals do, leaving pre-tax retirement assets to charity may be more efficient than leaving those same assets to family members.
For example, a person may choose to leave taxable retirement accounts to charity and leave taxable brokerage accounts, Roth accounts, life insurance, or real estate to family.
This is not always the right answer, but it is worth reviewing as part of estate and beneficiary planning.
Charitable Giving for Business Owners
Business owners may also use charitable giving as part of a broader financial and community strategy.
Many business owners support local schools, youth programs, religious organizations, hospitals, community foundations, and nonprofit events. But the giving is often reactive.
Someone asks. They donate.
A more intentional approach may include:
- Creating an annual charitable giving budget
- Choosing a few core causes to support consistently
- Coordinating business and personal giving
- Reviewing whether gifts should be made personally or through the business
- Using appreciated investments instead of cash when appropriate
- Building charitable giving into succession or exit planning
Business owners are often in the best position to make a meaningful community impact, but they should coordinate the strategy with their CPA, attorney, and financial advisor.
A Simple Charitable Giving Framework
A strong charitable giving plan starts with four questions.
What causes matter most to you?
The best giving plan starts with purpose. Before discussing taxes, identify the organizations and causes you want to support.
How much can you afford to give?
Charitable giving should be generous, but it should also fit your financial plan. The goal is to support others without putting your own retirement, cash flow, or family needs at risk.
What is the best asset to give?
Cash is simple, but it is not always the most efficient. Appreciated investments, IRA assets, or donor-advised fund contributions may be better depending on your situation.
When should you give?
Timing matters. A gift made in a high-income year may produce a different tax result than the same gift made in a lower-income year.
Common Mistakes to Avoid
One common mistake is giving cash when appreciated investments would have been more tax-efficient.
Another is waiting until late December to start planning. Charitable giving strategies involving appreciated securities, donor-advised funds, or IRA distributions may require paperwork and processing time.
A third mistake is assuming a charitable gift will automatically reduce taxes. If you do not itemize deductions, or if your gift does not meet IRS requirements, the tax benefit may be limited.
A fourth mistake is forgetting to keep records. The IRS has substantiation requirements for
charitable gifts, especially for larger or non-cash donations. For certain non-cash gifts over $5,000, additional reporting and appraisal requirements may apply.
Final Thoughts
Charitable giving is one of the most personal parts of financial planning.
It allows you to support the people, organizations, and causes that matter most. But when done thoughtfully, it can also become a smart planning strategy.
The goal is not simply to give for a tax deduction. The goal is to give with purpose, structure, and intention.
For some families, that may mean using a donor-advised fund. For others, it may mean donating appreciated investments. For retirees, it may mean using qualified charitable distributions from an IRA. For business owners, it may mean creating a more formal annual giving plan.
The best charitable giving strategy is the one that helps you make a meaningful impact while fitting into your broader financial plan.
Before making a major charitable gift, speak with your financial advisor, CPA, and estate planning attorney to make sure the strategy fits your tax situation, retirement plan, and long-term goals.
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. www.SIPC.org 1000 Corporate Drive, Floor 7 Fort Lauderdale, FL 33334 Telephone # (954) 938-8800
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