Charitable Giving Strategies to Reduce Taxes: How to Be Generous and Strategic

Tax season might be over, but now is the perfect time to start thinking about how your charitable giving could work harder for you next year. We've had several clients reach out with questions about how to give in a way that's not only meaningful but also tax-smart.

Whether you're already making annual gifts or you're thinking about a larger contribution in the coming years, charitable giving should be part of a broader financial strategy. In this post, we’ll break down three of the most effective—and underused—ways to give: Donor-Advised Funds (DAFs), gifting appreciated stock, and Qualified Charitable Distributions (QCDs). These aren’t just tools for the ultra-wealthy; they’re strategies everyday investors can use to reduce taxable income, avoid capital gains, and make a bigger impact.

1. Donor-Advised Funds (DAFs): Give Now, Decide Later

A Donor-Advised Fund acts like a charitable investment account. You contribute cash, appreciated securities, or other assets into the fund—and receive an immediate tax deduction, even if you don’t distribute the funds to charities right away.

Why it works:

You control the timing of your donations. If you’re having a high-income year, you can contribute now to lock in the deduction and recommend grants to nonprofits later—even years later.
Assets inside the DAF can be invested and grow tax-free, giving you the potential to give more over time.

Stat to know: According to the National Philanthropic Trust, contributions to DAFs reached $85.5 billion in 2023—a 9% increase from the previous year. It’s a strategy more and more families are using for multi-year giving plans.

Real-life example: One of our clients sold a business in 2023 and was facing a large capital gain. She contributed $250,000 to a donor-advised fund before year-end, dramatically reducing her tax bill. Now, she’s taking her time deciding which organizations to support over the next several years.

2. Donate Appreciated Stock (Instead of Cash)

If you’re sitting on gains in your investment portfolio, donating appreciated stock can be one of the most efficient ways to give. Instead of selling the stock, paying capital gains tax, and donating the remainder—you donate the shares directly. That way, you:

Avoid capital gains tax
Receive a deduction for the full fair market value

Stat to know: Fidelity Charitable reports that donating appreciated securities rather than cash can save donors 20–30% more in taxes.

Real-life example: A couple we work with regularly donates $10,000 worth of stock each year to their favorite nonprofit. Because the stock had nearly doubled in value since they bought it, this move saved them over $3,000 in capital gains taxes—and let them take the full $10K deduction.

This is especially powerful after strong market years. If you’ve been investing consistently and your portfolio is up, consider donating from your winners rather than your wallet.

3. Qualified Charitable Distributions (QCDs): Tax-Free Giving From Your IRA

For clients aged 70½ or older, a Qualified Charitable Distribution (QCD) is a game-changer. It allows you to transfer up to $100,000 per year directly from your IRA to a qualified charity. This counts toward your Required Minimum Distribution (RMD), but unlike normal IRA withdrawals, it doesn’t increase your taxable income.

Why is that a big deal?

Keeping your taxable income lower can help avoid higher Medicare premiums or a bump into a higher tax bracket.
It’s a great strategy for retirees who don’t need all of their RMDs for living expenses.

Pro Tip: The QCD limit is per person, so married couples can each give up to $100,000/year tax-free.

Real-life example: One client nearing age 73 didn’t want to increase his taxable income just to meet RMD rules. We helped him send $20,000 directly from his IRA to his alma mater and a local food bank—he met his RMD requirement and kept his adjusted gross income (AGI) low.

Bonus: Bundle Your Giving for a Bigger Deduction

If you don’t itemize deductions each year, one additional strategy to consider is bundling your charitable contributions. Instead of giving $10,000 per year, you might give $30,000 every three years. This can push you above the standard deduction threshold and allow you to benefit from itemizing in the years you give.

You can even combine this with a donor-advised fund to simplify distribution across multiple nonprofits over time.

Final Thoughts: Give With Intention

The truth is, charitable giving is one of the most fulfilling financial moves you can make—but it can also be one of the most strategic. Whether you're passionate about a cause or just looking for ways to reduce your tax bill while doing good, there are options for nearly every situation.

And the earlier you plan in the year, the more opportunities you have to align your giving with your overall financial picture. That’s why we’re bringing it up now—not in December, when the window to act is rapidly closing.