Giving to Charity This Year? Consider the Tax Strategy Too

Most of us consider the end of the year as the season of giving. While you may have put some thought into how much you’d like to give this year, have you considered the best way to do it? The biggest benefit of charitable giving is supporting an organization that holds special meaning to you. But that doesn’t mean you can’t incorporate some potential tax advantages as well. 

Start With a Plan

Before writing a check, build a plan. Ask yourself:

• What causes do I want to support?

• Which assets should I donate this year?

• How much do I want to give?

• Is this a one-time donation, or do I want to do this annually?

Don’t forget, for your donation to be tax-deductible, it’ll need to be completed by December 31. That means checks should be postmarked, stock transfers settled, and any other finalizing paperwork finished before New Year's Eve. With the hustle and bustle of the holiday season, consider starting well before the deadline to ensure your donations go through in the year intended. 

Think Beyond Cash

You might associate the idea of charitable giving with cash donations. While cash is certainly acceptable, it’s not your only option. It might not be your most tax-efficient option either. 

If your portfolio includes highly appreciated assets, including stocks, property, or other investments, you may be able to donate them as well.

Donating appreciated assets enables you to deduct the full value from your portfolio and avoid paying capital gains tax on the profit. If you chose to sell the asset first and donate the proceeds, you’d owe capital gains tax on the sale (minus the cost basis), reducing the donation value and creating an unnecessary tax event. 

3 Ways to Give

While you always have the option to donate directly to a charity of your choice, there are certain vehicles and strategies that may help stretch the benefits of giving a little further.

Donor-Advised Funds

A donor-advised fund (DAF) is an account created exclusively for charitable giving purposes. Once the account is created, you will have the ability to contribute assets, including cash, stocks, bonds, and other investment types. Anything you contribute (up to the annual deduction limit) will be deducted from your taxable income. 

DAFs are helpful tools for converting non-cash assets into charitable donations. When you’re ready, you can direct the funds to make a donation to your intended qualifying charity. The benefit of a DAF is that you don’t have to wait until a distribution to charity is made to enjoy the tax benefits. 

Qualified Charitable Distributions (QCDs)

If you have an IRA, you’ll be subject to required minimum distributions (RMDs) starting at age 73. As a reminder, RMDs (and any other withdrawals from your tax-deferred retirement accounts) create taxable income.

If you’re charitably minded, qualified charitable distributions (QCDs) are one strategy to effectively donate while fulfilling your RMDs. Starting at age 70½, you’ll be allowed to make direct IRA-to-charity transfers that count towards your RMDs and don’t increase your taxable income for the year. 

You may find it helpful to speak with an advisor or tax professional before pursuing a QCD strategy, as there are limitations and important considerations to make first. 

Bunching Donations

The IRS limits the amount you can deduct for charitable giving. In 2026, those taking the standard deduction may deduct up to $1,000 (or $2,000 for joint filers) in qualifying donations. If you’re itemizing, you can deduct the portion of your donations exceeding 0.5% of your adjusted gross income (AGI). 

Some donors “bunch” multiple years’ worth of donations to meet the AGI floor and clear the standard deduction threshold. Notably, a donor-advised fund is an ideal vehicle for pursuing this strategy, since you can contribute all at once while spreading donations across multiple tax years or periods. 

Ready to Give This Year?

If you have it in your heart to give this year, consider doing so with a little tax strategy in mind. You might find it helpful to speak with an advisor or tax professional first, just to make sure you’re giving as efficiently as you’re able. If you’d like to talk to our team about your charitable giving intentions for 2026, don’t hesitate to reach out anytime and schedule a call. 

John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.

This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.