Writing a check to your favorite charity feels good. You’re supporting a cause you believe in, and if you itemize deductions, you’ll get a tax break. But what if you could give more while keeping more? It sounds counterintuitive, but the tax code offers several ways to amplify both your charitable impact and your tax savings, that is, if you know where to look.
Most people default to cash donations because they’re simple and straightforward. Pull out your checkbook, write the amount, and you’re done. The problem is that cash donations, while valuable, often leave money on the table. When you have appreciated assets sitting in your portfolio, stocks that have doubled or tripled in value, or real estate that’s grown over the years, donating those assets instead of cash can unlock benefits that many donors never realize exist. The difference between an average charitable giving strategy and a smart one often comes down to understanding what you can give beyond cash.
Why Cash Isn’t Always King
Cash donations work fine if you’re taking the standard deduction and making small contributions throughout the year. But once your giving reaches a meaningful level, cash becomes inefficient. You’re limited to deducting up to 60% of your adjusted gross income for cash gifts to public charities, and you’re paying with dollars that have already been taxed.
Compare that to donating appreciated securities you’ve held for more than a year. When you give stock directly to a charity, you avoid paying capital gains tax on the appreciation, and you can still deduct the full fair market value. For someone in the 24% tax bracket with investments that would trigger a 15% capital gains tax, this strategy can save roughly 20% more than giving the same amount in cash.
The Power of Appreciated Securities
Think about stock you bought years ago for $10,000 that’s now worth $40,000. Selling it would trigger capital gains tax on that $30,000 profit, around $4,500 at a 15% rate. But if you donate the shares directly to a qualified charity, you skip the capital gains tax entirely and deduct the full $40,000 value. (If you wish to continue to own the stock, simply use your cash to buy it back, effectively making your strategy more tax-friendly.)
Most charities are set up to accept stock donations easily. Your financial advisor can coordinate the transfer from your brokerage account to the charity’s account. Once the charity receives the shares, they can sell them without owing taxes since they’re a tax-exempt organization. The charity gets the full value, you get the full deduction, and the IRS gets nothing.
Qualified Charitable Distributions from IRAs
If you’re 70½ or older with a traditional IRA, Qualified Charitable Distributions offer one of the cleanest tax strategies available. You can transfer up to $108,000 per year directly from your IRA to qualified charities without counting that distribution as taxable income.
How QCDs Work
The money goes straight from your IRA to the charity; you never touch it. More importantly, it doesn’t show up as income on your tax return. This matters because once you hit age 73, you’re required to take minimum distributions from your traditional IRA, whether you need the money or not. Those distributions count as ordinary income and can push you into a higher tax bracket, increase your Medicare premiums, and cause more of your Social Security benefits to become taxable.
A QCD lets you satisfy your required minimum distribution without all those tax headaches. Even if you take the standard deduction and don’t itemize, a QCD still provides tax benefits by keeping that distribution out of your adjusted gross income entirely.
Rules to Follow
The distribution must go directly from your IRA custodian to the charity. You can’t withdraw the money yourself and then donate it; that doesn’t qualify. The charity must be a church or 501(c)(3) organization, and you can’t receive any goods or services in return. Donor-advised funds and private foundations don’t qualify for QCDs, but most churches, schools, hospitals, and traditional charities do.
And, remember that QCDs can only be made from IRAs, not employer retirement accounts like 401Ks and 403Bs.
Donor-Advised Funds for Flexible Giving
Donor-advised funds have become incredibly popular because they combine immediate tax benefits with long-term flexibility. You contribute assets to your donor-advised fund account, receive an immediate tax deduction, and then direct grants to charities over time.
Bunching Strategies
With the standard deduction at $15,750 for single filers and $31,500 for married couples in 2025, many people find their itemized deductions don’t exceed those thresholds. A donor-advised fund solves this problem through bunching.
A donor-advised fund can help you ‘bunch’ multiple years of charitable gifts into a single tax year. Instead of making the same contribution annually, you can make a larger gift to your donor-advised fund in one year, take the charitable deduction that year if you itemize, and then direct grants to nonprofits over the next several years.
During high-income years, for example, if you sold a business or received a large bonus, contributing to a donor-advised fund captures the tax deduction at your highest tax rate. The assets in the fund can grow tax-free, and you maintain control over which charities ultimately receive grants.
Asset Flexibility
Donor-advised funds accept more than cash and stocks. You can contribute real estate, private business interests, and even cryptocurrency to many fund sponsors. The fund handles the complexity of selling these assets, and you get the immediate deduction based on fair market value.
Real Estate and Other Assets
Donating appreciated real estate can provide substantial tax benefits, though it requires more planning than securities transfers. Whether it’s a personal residence, vacation home, or investment property, you can deduct the fair market value without paying capital gains tax on the appreciation.
One creative approach is the retained life estate. You donate your home to charity but retain the right to live in it for the rest of your life. You get an immediate charitable deduction for the present value of the charity’s future interest while continuing to enjoy your home. When you pass away, the charity takes full ownership.
Real estate donations require qualified appraisals and willing charitable recipients. Some charities readily accept property, while others prefer not to deal with maintenance and the eventual sale of the property. Planning ahead ensures the process goes smoothly.
Timing Your Giving
The tax benefit of charitable deductions depends heavily on your marginal tax rate, which can swing year to year. Someone planning to sell a business or exercise stock options faces a spike in taxable income for that year. Making substantial charitable contributions in the same year means those deductions offset income taxed at the highest rates.
This is where strategy matters more than sentiment. Bunching several years of charitable giving into high-income years maximizes tax savings. In lower-income years, you take the standard deduction. Over multiple years, you’ve made the same total contributions but received greater tax benefits.
Work With Us
Getting your charitable giving strategy right requires looking at your complete financial picture. The best approach depends on your income, the assets you hold, your age, and your long-term goals. What works for someone in their 40s with a concentrated stock position looks different from what makes sense for a retiree managing required minimum distributions.
At Brogan Financial, we help clients develop charitable giving strategies that align with their values while maximizing tax efficiency. Whether you’re exploring donor-advised funds, considering a Qualified Charitable Distribution, or wondering how to handle appreciated assets, we’ll work with you to create a plan that accomplishes your philanthropic goals. Contact us today to discuss how we can help you give smarter, not just more generously.
