The holiday season tends to inspire philanthropic efforts — about 30% of giving typically takes place in December.¹ With nearly two-thirds (62.7%) of charitable giving in the U.S. coming from individual donors,² developing a tax-savvy giving back strategy can be an important part of a comprehensive financial plan — and help make doing good an effective year-round endeavor.

Consider the type of gift

Stocks. You may consider donating assets other than cash. If you opt to gift a publicly traded security, think about gifting the stock itself, rather than selling it to donate the proceeds. The sale of a stock you’ve owned long term (one year or longer) that has appreciated in value may be subject to a capital gains tax of 15% or 20%. Donating a Long-term security potentially can be more effective, since it may allow you to eliminate capital gains taxes and wash sale rules — and may provide you with the opportunity to make an overall larger gift. Since qualified charitable entities (those that meet certain IRS requirements) are exempt from capital gains tax,³ the full stock value can go toward support of the charity’s mission.

If you do choose to sell the stock before donating, consider also selling assets that have depreciated in value so that you may be able to offset the gain by recognizing capital losses and taking advantage of tax-loss harvesting.

IRAs. Donating a portion of retirement savings can be an easy, tax-favorable way to contribute to charitable causes, depending on your individual circumstances. If you’re over age 70½, you can make qualified charitable distributions (QCDs) of up to $105,000 in 2024 and up to $108,000 in 2025 from your Individual Retirement Arrangement (which includes traditional and Roth IRAs) to qualified charities, tax-free.⁴ If you’re 73 or older, QCDS also count toward your required minimum distribution for the year.⁵

Donor-advised funds (DAFs). DAFs are established solely for the purpose of charitable donations. If you contribute directly to a DAF, the money potentially grows tax-free, and you may be eligible for a deduction on your federal taxes — but you must itemize deductions to qualify for this benefit.

Optimize your giving power

“Bunch” donations. If your itemized deductions fall short of the standard deduction in a given year, you may want to think about “bunching” as a strategy for maximizing deductions. This involves consolidating several years’ worth of donations into one year if you have the financial capability to do so.

Identify qualified organizations.* According to section 170(c) of the Internal Revenue Code, charitable contributions made to certain qualified organizations are eligible for tax deductions (assuming specific circumstances are met):⁶

✔️ A U.S. state or possession, if donations are made exclusively for public purposes

✔️ A U.S. foundation, fund, organization, or trust operated exclusively for charitable, religious, educational, scientific, or literary purposes, or the prevention of cruelty to children or animals

✔️ Religious organizations such as churches and synagogues

✔️ U.S. veterans’ organizations

✔️ Volunteer fire non-profits

✔️ Civil defense organizations created under federal, state, or local law (and related unreimbursed expenses of civil defense volunteers related solely to their volunteer services)

✔️ U.S. fraternal societies/lodges (if funds are used exclusively for charitable purposes)

✔️ Non-profit cemetery companies where funds are irrevocably dedicated to the perpetual care of the entire cemetery

Other ways to share the wealth

As you prepare to implement your tax-effective giving strategy, it may make sense to find out up front if the charities that are important to you accept non-cash gifts. Whether ultimately you choose to donate cash, stock, or another asset from your portfolio (such as real estate, bonds, company stock from your workplace, or cryptocurrency), consider consulting a financial, legal, or tax professional about the specific charitable giving rules that apply.