As the year winds down, many people feel the pull to give back to the causes, organizations, and communities that matter most.
But charitable giving isn’t just good for the heart - it can also be good for your finances. With a little strategy, your generosity can help reduce your taxable income, simplify your estate, and even fulfill required distributions you don’t need.
Here are a few tax-smart ways to make a meaningful impact before December 31st.
Use Charitable Deductions to Lower Taxable Income
If you itemize deductions, charitable contributions can directly reduce your taxable income for 2025. The key is to make your gifts before December 31st to have them count for this tax year.
- Cash gifts can typically be deducted up to 60% of your adjusted gross income (AGI).
- Non-cash gifts - such as clothing, furniture, or appreciated stock - are generally deductible up to 30% of AGI.
Even small, consistent donations can add up, and when you plan ahead, they can work hand-in-hand with your broader tax strategy. (Note: Always keep receipts or acknowledgment letters for any single donation of $250 or more.)
Try “Bunching” Your Charitable Contributions
Not every year makes sense to itemize deductions, especially since the standard deduction remains high. That’s where bunching comes in.
Bunching means grouping several years’ worth of charitable contributions into one tax year to push your total deductions above the standard threshold.
Example:If you typically donate $5,000 per year, consider donating $10,000 this year and skipping next year’s gift. That way, you can itemize this year for greater tax savings, then take the standard deduction next year.
It’s a simple way to be strategic about when and how you give without reducing your overall generosity.
Open or Add to a Donor-Advised Fund (DAF)
If you want to make a large charitable contribution this year but prefer to distribute the money to charities over time, a Donor-Advised Fund (DAF) might be the perfect solution.
Here’s how it works:
- You contribute cash, stock, or other assets to a DAF and take an immediate tax deduction.
- The funds can grow tax-free.
- You decide when and where to grant funds to charities in future years.
Example: You donate $25,000 of appreciated stock to a DAF in 2025. You avoid paying capital gains tax on the stock’s growth, receive an immediate deduction for the full value, and can support your favorite nonprofits gradually over several years.
Give Directly from Your IRA (for Those 70½ or Older)
If you’re subject to Required Minimum Distributions (RMDs), those withdrawals can increase your taxable income - even if you don’t need the funds.
The solution? Make a Qualified Charitable Distribution (QCD). This allows you to donate up to $108,000 per year (for 2025) directly from your IRA to a qualified charity.
A QCD:
- Counts toward your RMD,
- Isn’t included in your taxable income,
- And provides direct support to the causes you care about.
It’s one of the most tax-efficient ways to give if you’re retired.
Donate Appreciated Assets Instead of Cash
If you’ve held an investment - like stock or mutual fund shares - for more than a year and it’s appreciated in value, consider donating it instead of selling.
Here’s why:
- You can deduct the fair market value of the asset.
- You avoid paying capital gains tax on the appreciation.
- The charity receives the full value of the stock.
Example: Let’s say you bought stock for $3,000 that’s now worth $10,000. If you sell it, you’ll owe capital gains tax on the $7,000 gain. But if you donate it directly to charity, you’ll get a deduction for the full $10,000 and pay no capital gains tax - a win-win.
Next Steps
If you’re thinking about year-end giving, New Beginnings Wealth Advisors can help you:
- Review which strategy best fits your tax picture,
- Identify appreciated assets to gift, and
- Coordinate with your CPA to ensure everything is properly documented.
CLICK HERE to make an appointment.
If you know someone who’s been thinking about giving back this year, feel free to share my information. Helping people make meaningful financial decisions is what I love to do.