Charitable Giving: Simple Strategies for End-of-Year Planning
Winston Churchill once said something along the lines of “it is more agreeable to have the power to give than to receive.” The holiday season is a good time to think about charitable giving and how it fits into your overall financial plan. Smart charitable planning can help you support causes you care about while also helping with your taxes. The question isn’t just whether to give, but how to give in ways that help both the organizations you support and your personal finances.
This year is a particularly good time to think about charitable planning. Learning how to organize your charitable gifts can make generosity an important part of your overall financial strategy. As your Southwest Florida financial advisor, it would be my privilege to help you review and strategize your charitable gifts and financial strategy.
Total household wealth has reached a new high
Americans donated $593 billion to charity in 2024, which was 6.3% more than in 2023, according to the National Philanthropic Trust.1 This shows that charitable giving is still important to many families, even though fewer Americans are donating compared to past years. As the chart shows, total household wealth has grown steadily along with the economy and stock market. Higher income and wealth, combined with changes to tax rules, have created new reasons to give.
Charitable giving also matters when planning what happens to your money after you pass away (called estate planning). Money left to charity doesn’t get taxed by the estate tax, which makes charitable gifts an efficient way to reduce taxes while supporting causes you believe in. For people with large estates that would normally be subject to estate tax, combining gifts made during your lifetime with gifts made after you pass away can significantly lower the tax bill for your heirs (the people who inherit your money).
Most importantly, charitable giving can help create a lasting legacy, reinforce family values across generations, and reduce taxes during your lifetime. For many families, giving to charity becomes a way to include children and grandchildren in meaningful conversations about values and taking care of wealth. The challenge is that while the desire to give is simple, finding the best approach requires careful planning. As a Southwest Florida financial planner, it’s my privilege to help you make intentional charitable decisions that fit into your overall financial legacy strategy.
When and how you give matters more than ever
The One Big Beautiful Bill Act (OBBBA) has created important changes for charitable giving. Most significantly, it makes it easier for more people to itemize their tax returns (which means listing out your deductions one by one instead of taking the standard deduction). This happened because the law increased the cap on state and local tax (SALT) deductions from $10,000 to $40,000. Since charitable contributions only reduce your taxes if you itemize, this makes charitable giving more important in tax planning today.
Additionally, there’s a time-sensitive window from 2025 through 2029 to optimize when and how you give. This is because, starting in 2026, the OBBBA introduces a minimum threshold (called a floor) for charitable deductions for people who itemize of 0.5% of your adjusted gross income (AGI is essentially your total income minus certain deductions). This means that only the portion of your charitable gifts that exceeds 0.5% of your AGI will be deductible. For example, if someone has $200,000 in AGI, only donations above $1,000 (0.5% of $200,000) would be deductible.
One strategy that some people use to overcome this challenge is called “bunching,” which means combining multiple years of giving into a single tax year to exceed the minimum threshold. This approach has become more popular since the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, which reduced the number of households that itemized.
Another key consideration is deciding which assets to donate. For example, giving away stocks or other investments that have increased significantly in value offers three key tax benefits: it avoids the capital gains tax you would pay if you sold them, removes future growth from your estate, and provides a deduction on your regular income. For regular income deductions, you should consider whether the recipient is a public or private charity and what your estimated AGI is. This “triple benefit” can be especially attractive during years when you have significant capital gains, such as when stock compensation from your employer vests or after selling a business, and when there are no losses to offset the gain.
Including charitable giving in your portfolio rebalancing (adjusting your investments to maintain your desired mix) can also help with tax efficiency. Some people prioritize giving away appreciated assets held in regular taxable accounts, then replace those holdings through purchases in tax-deferred accounts (like retirement accounts). As a Southwest Florida financial planner, we can use this approach to help you maintain the investment mix you want while getting the most tax benefits.
Examples of ways to give to charity
Different ways of giving to charity serve different purposes, and choosing the right one depends on your specific situation and goals. The following are some common examples, though this isn’t a complete list:
Donor-advised funds (DAFs) have become very popular, with assets exceeding $250 billion.1 DAFs work like charitable investment accounts: you make a contribution, receive an immediate tax deduction, and then recommend grants to charities over time. The funds can be invested and grow without being taxed while you decide when and where to give. DAFs are especially valuable in years when maximizing deductions is important.
Under the new tax rules, donors can structure DAF contributions to make sure they exceed the 0.5% AGI minimum threshold described earlier. DAFs are also simpler than other options, making them accessible to more donors.
Qualified charitable distributions (QCDs) are another option for people aged 70½ or older with traditional IRAs (Individual Retirement Accounts). QCDs allow you to transfer up to $108,000 for tax year 2025 directly from your IRA to charities. This can satisfy required minimum distribution (RMD) rules—the amount you must withdraw from your retirement account each year—while excluding the amount from your taxable income. QCDs provide tax benefits regardless of whether you itemize, so they can be valuable in years when itemizing doesn’t make sense.
Charitable remainder trusts (CRTs) provide another option to support charitable causes as part of estate planning. With a CRT, you transfer assets into a trust that pays income to beneficiaries for a specific period, with what’s left going to charity. This can be especially useful for assets that have increased significantly in value, since the trust can sell them without you paying immediate capital gains taxes.
As with any other trust arrangement, care should be taken with how it’s structured. For example, certain retained powers could cause the asset to be included in your estate. Additionally, naming beneficiaries other than yourself or your spouse could trigger a gift tax.
For those fortunate enough to have substantial assets and long-term charitable goals, additional options may include:
• Private foundations, which offer maximum control and family governance structures but come with higher administrative requirements, minimum distribution rules, and taxes on investment income
• Charitable lead trusts, which provide income to charity for a period before assets pass to heirs
• Supporting organizations, which work closely with specific public charities
• Pooled income funds offered by certain charitable institutions
These examples represent some of the most common ways to give to charity, but there are additional options and variations that may be appropriate depending on your specific situation. Working with a trusted advisor can help determine which approach best fits your goals.
Charitable giving as part of your overall financial plan
The bottom line? With year-end approaching and new tax rules creating both opportunities and things to consider, it’s important to optimize when, how, and through what methods you make your charitable gifts. This can help maximize both your impact on causes you care about and your financial goals.
1. https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/
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