Smart Charitable Giving: Maximize Your Impact, Minimize Your Taxes

Charitable giving is a powerful way to support causes you care about, create a personal legacy, and make a meaningful difference in your community. But beyond generosity, there’s also strategy. With thoughtful planning, your charitable contributions can be both impactful and tax-efficient.

Whether you're giving regularly or planning a larger gift, here are key strategies to help you give smarter—and potentially reduce your tax bill in the process.

Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older and have a traditional IRA, you can make a Qualified Charitable Distribution (QCD)—a direct transfer of funds from your IRA to a qualified charity.

• Limit: Up to $100,000 per year (indexed for inflation).
• Tax benefit: The amount doesn’t count as taxable income and satisfies your Required Minimum Distribution (RMD), if applicable.

Unlike typical charitable donations, QCDs don’t require itemizing. They reduce your adjusted gross income (AGI), which can have further benefits like lowering Medicare premiums or reducing the taxable portion of Social Security.

Bunching Donations with Donor-Advised Funds (DAFs)

With today’s high standard deduction ($15,700 for single filers and $31,400 for married couples filing jointly in 2025), many people find they can no longer itemize deductions, meaning they don’t get a tax break for charitable giving every year.

One solution is bunching donations—combining several years’ worth of contributions into a single tax year to exceed the standard deduction and maximize the benefit.

A Donor-Advised Fund (DAF) can be an ideal tool for this strategy:

• You contribute a lump sum to the DAF in one year and take the full tax deduction.
• Over time, you direct grants to the charities of your choice.
• Contributions to DAFs can include cash or appreciated assets (like stocks), offering additional tax benefits.

This approach offers flexibility, allowing you to plan your taxes while supporting charities consistently over time.

Donate Appreciated Securities Instead of Cash

Donating long-term appreciated stocks, mutual funds, or ETFs directly to charity can be more tax-efficient than giving cash.

Benefits:

• Avoid capital gains taxes on the appreciation.
• Deduct the full fair market value (if you itemize), up to 30% of your AGI.

This strategy is especially useful for those with low-cost-basis investments that have appreciated significantly. It allows you to give more at a lower after-tax cost.

Note: Make sure the securities are held for more than one year to qualify as long-term gains.

Make Giving Part of Your Estate Plan

Charitable giving doesn’t have to end during your lifetime. Strategic gifts can also be part of your estate plan.

Options include:

• Bequests: Name a charity in your will or trust.
• Beneficiary designations: List a nonprofit as the beneficiary of a retirement account or life insurance policy.
• Charitable remainder trusts (CRTs): These provide income to you or your heirs for a set period, with the remainder going to charity.

Leaving tax-deferred assets, such as traditional IRAs, to charity can be especially efficient. Nonprofits don’t pay income taxes on these funds, unlike individual heirs who would.

Be Strategic with Timing

Sometimes, charitable giving is most efficient in high-income years—such as when selling a business, exercising stock options, or converting a traditional IRA to a Roth IRA. Timing larger gifts to coincide with such events can increase the value of your deduction.

Similarly, planning ahead for RMDs or tax bracket changes can help you determine the best time to give for maximum tax savings.

Final Thoughts

Charitable giving doesn’t have to be spontaneous to be meaningful. With a bit of planning, your contributions can not only support the organizations and causes you care about but also work in harmony with your broader financial and tax strategy.

From Qualified Charitable Distributions and donor-advised funds to appreciated securities and legacy gifts, there are a variety of tools available to help you give smarter.

As always, it’s wise to consult your Apella Wealth Advisor or other professionals to ensure your giving strategy aligns with your financial goals and makes the most of available tax benefits.

Disclaimer: This article is for informational purposes only and should not be considered tax or financial advice. Please consult with a qualified professional before making any financial decisions.

Disclosures:

Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.