Giving With Purpose: Smart Ways to Give Before Year-End
As the holidays approach, many of us feel the pull to give back. The good news is that with a little planning, how you give can matter almost as much as how much you give. Different types of gifts are treated differently for tax purposes, and a thoughtful choice can stretch your generosity further.
This is one of the places where financial planning, taxes, and estate planning work together as three legs of the same stool.
Four ways to give
1. Cash gifts. The simplest approach is giving cash directly to a qualified charity. Beginning in 2026, there's also a new, limited deduction for cash gifts to qualifying charities for people who take the standard deduction (up to $1,000 for single filers and $2,000 for married couples filing jointly). Gifts to donor-advised funds don't qualify for this deduction. For people who itemize, a new floor also applies starting in 2026, which means only giving above a certain share of your income counts toward the deduction. Your tax professional can tell you how these rules apply to you.
2. Appreciated investments. If you've held an investment in a taxable account for more than a year and it has grown in value, giving the shares directly to charity, rather than selling them and donating the cash, can allow you to avoid paying capital gains tax on the growth. If you itemize, you may also be able to deduct the fair market value of the gift.
3. Donor-advised funds. A donor-advised fund works like a charitable giving account. You contribute cash or appreciated assets, may be eligible for a tax deduction in the year you contribute, and then recommend grants to your favorite charities over time. Some people use a donor-advised fund to "bunch" several years of giving into one year, which can be helpful if you're near the line between itemizing and taking the standard deduction.
4. Qualified charitable distributions (QCDs). If you're age 70½ or older, you can direct money from your IRA straight to a qualified charity. The amount isn't included in your taxable income, and once you're taking required minimum distributions, a QCD can count toward that requirement. The transfer needs to go directly from the IRA to the charity, and there's an annual limit set by the IRS.
Hypothetical example (for illustration only): Imagine a retiree who doesn't need her full required minimum distribution for spending and already gives to her church and a local food bank each year. Rather than taking the distribution, paying tax on it, and then writing checks, she asks her IRA custodian to send part of the money directly to those charities as a QCD. Because the money goes straight to the charities, it isn't added to her taxable income. The right approach for any real person depends on their own circumstances and should be reviewed with their tax professional.
How this fits your journey
Accumulation: This is a great time to build the habit of giving, even in small amounts, and to learn which kinds of accounts and assets can be used.
Income & Preservation: If you're taking required minimum distributions, a QCD may be a way to give while managing your taxable income.
Legacy Planning: Giving doesn't have to stop during your lifetime. Naming a charity as a beneficiary of an IRA, for example, can be a thoughtful way to leave a lasting gift, since qualified charities generally don't pay income tax on those assets.
A note on timing
Year-end deadlines are real. Gifts generally need to be completed by December 31 to count for this tax year, and transfers of stock, donor-advised fund contributions, and QCDs can take time to process. If you're considering any of these, it's wise to start early rather than in the final days of the year.
Three questions to bring to your next planning conversation
- What causes matter most to me, and how much would I like to give over the next few years?
- Which of my accounts or investments would be the most tax-smart to give from?
- Is giving part of my legacy plan, and have I coordinated it with my beneficiary designations?
The best giving strategy is one that reflects your values first, with the tax details built around them.
Want to explore how giving fits into your bigger financial picture? Let’s talk through it! Scroll below to schedule a time convenient for you on our calendar.
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