The whole idea of “giving” looks so different for so many people. For some, it may be as simple as writing a check to raise money for their son’s baseball team. Others might tithe to a faith-based group every week, or pledge an annual donation each December.
But the idea of charitable giving (and the opportunities it presents) can be even more meaningful for many. Thoughtful giving strategies enable you to live out your deeply held values, establish a legacy, and make a tangible difference in the world.
Whatever your reason, approaching charitable giving with both heart and strategy can ensure that your generosity has a lasting impact, while also working within the framework of your broader financial plan.
Below, we’re exploring the practical steps for building a sustainable giving approach and the tax-focused strategies that can help you maximize the benefit to your chosen causes.
It may sound obvious, but before we dive into some strategies for giving generously, we invite you to pause and consider your why first.
Charitable giving feels truly rewarding when it’s rooted in genuine intention. For some, that intention is highly personal, often hitting close to home. Maybe a grandparent passed away from a rare illness, or perhaps you’ve witnessed firsthand the devastation a natural disaster can bring to a community.
Your personal experiences very well may spark a desire to support underfunded research, disaster relief, or local organizations that address critical needs.
If that’s the case…
You could consider setting up recurring annual, semi-annual, or monthly donations directly with your charity of choice. Certain giving tools, like a donor-advised fund (DAF), can help streamline this process as well (more on this later).
Maybe you’ve grown up watching your family members donate their time, energy, skills, or resources to charity regularly. It’s not unusual for charitably-minded families to spend Thanksgiving mornings at the soup kitchen or Saturdays volunteering at the local animal rescue.
Now, as an adult who’d like to keep these traditions going, you intend on incorporating charitable giving into your own financial life while preparing to pass on those values to your children and grandchildren.
If that’s the case…
Your family may already have established certain charitable giving tools, like donor-advised funds or charitable trusts. If not, you may want to consider which tools can best help promote multigenerational giving.
While charitable giving can be a mutually beneficial financial move, the tax benefits are sometimes overhyped. Yes, you can deduct charitable donations from your taxable income if it meets IRS guidelines—but it’s not a dollar-for-dollar savings. To receive a dollar-for-dollar savings, you’d need to receive a tax credit, not a deduction.
Making a charitable donation (especially one sizable enough to significantly impact your tax bill) is still a reduction in income. There’s a common saying for this: “Don’t let the tax tail wag the dog.” More plainly put, sometimes it’s not worth the greater outcome to pursue the highest tax savings.
Optimizing your charitable giving for tax efficiency is a great plan, but giving charitably simply in an effort to reduce taxes may not yield the results you desire.
If that’s the case…
Consider talking to a tax professional about your tax reduction goals. There may be other options for addressing your tax liability that better suit your financial situation, if giving isn’t a top priority. For example, you may find it helpful to increase 401(k) contributions instead (if you aren’t maxing out the annual limit already).
Timing can play a big role in charitable impact. Nearly one-third of annual giving occurs in December, with ten percent of donations arriving in just the final three days of the year.1 While this holiday rush benefits organizations during peak season, charities also need support at quieter times. Establishing recurring donations earlier in the year can provide more predictable funding, which many nonprofits value even more than lump-sum contributions (though every bit helps).
In the same vein, consider whether you want your giving to be primarily proactive or reactive.
Proactive giving often involves setting a budget for annual donations and directing them toward chosen causes on a planned schedule. But when a natural disaster hits or a community member is in need, you may feel compelled to provide reactive support as well. Make sure your charitable giving budget accommodates your desires.
Think about what a sustainable amount of money to donate looks like. You should still be able to make progress on your financial goals and otherwise keep your financial well-being a top priority. Just like the flight attendants say, you need to put your own oxygen mask on before helping others. Donating is a noble endeavor, but it needs to work within your greater financial plan.
If you aren’t already familiar with a charity that supports a cause you care about, do your research. Not only does your charity need to be a registered 501(c)(3) nonprofit to appease the IRS, but you want to make sure your hard-earned wealth is being used the way you intend it.
Use third-party charity research tools, like Charity Navigator, to research the transparency, reliability, and reputation of the charity you’re considering.
With your goals, budget, and charity all decided, your next step is to consider the most effective way to give—both for you and the receiving organization. Here are four potential strategies to consider.
A donor-advised fund is one of the most versatile tools for giving. With a DAF, you make a tax-deductible contribution to the fund, then recommend grants to your chosen charities over time. Because contributions are deductible in the year they’re made, a DAF allows you to claim the tax benefit upfront while spacing out your giving in future years.
DAFs can be especially useful for families who want to involve children in the giving process. Since the funds can be distributed over many years, it creates opportunities for discussions about values and priorities, without the administrative burden of establishing a private foundation or charitable trust.
The 2017 tax law changes raised the standard deduction, and the recently passed One Big Beautiful Bill Act (OBBBA) made those increased deductions permanent. As a result, fewer taxpayers itemize each year. In addition, the OBBBA introduced a new above-the-line charitable deduction for those who take the standard deduction, capping out at $1,000. For those who still itemize, however, charitable deductions now must exceed 0.5% of their taxable income.2
For that reason, some charitable deductions don’t create a significant tax benefit unless they’re large enough to exceed the new itemized deduction minimum. That’s where “bunching” comes in.
Bunching involves consolidating several years’ worth of donations into a single year, so the total becomes high enough to justify itemizing deductions. In practice, this might mean donating three years of planned gifts at once. In years when you don’t give (or give less than $1,000), you take the standard deduction.
Pairing bunching with a donor-advised fund can make the process even smoother. You receive the deduction in the year you contribute to the DAF, but you can still distribute donations to charities gradually over time.
For investors holding securities that have grown significantly in value, donating appreciated stock is one of the most tax-efficient giving strategies. By transferring the stock directly to a qualified charity, you avoid paying capital gains tax on the appreciation, while still receiving a charitable deduction for the fair market value of the shares.
If you were to sell the stock first and donate the proceeds, you’d owe taxes on the gain, leaving less for the charity and more for the IRS. Direct donation ensures that 100% of the asset’s value goes toward your chosen cause, while also helping you rebalance your portfolio without triggering unnecessary tax liability.
A charitable remainder trust (CRT) is a more advanced tool that can provide both income during your lifetime and a gift to charity afterward. With a CRT, you transfer assets into the trust and receive income for a set period—often for life. At the end of that term, the remaining assets go to the charity of your choice.
This strategy can be appealing if you own highly-appreciated assets, or if you want to create a steady income stream while still committing to philanthropic goals. CRTs are complex, however, and require the assistance of legal and tax professionals.
Charitable giving is one of the most meaningful ways to align your wealth with your values. Whether you’re motivated by personal experience, family tradition, or the desire for tax efficiency, the key is to be intentional. Start by clarifying your reasons for giving, then develop a sustainable plan that balances your values with your long-term financial health.
By combining a thoughtful, tax-focused strategy with your giving goals, you can ensure that your donations make a lasting difference for the causes you care about most (while supporting your greater financial picture).