How to Optimize Charitable Giving to Make a Difference

Contributing to charity and making a difference can be one of the most rewarding life events for investors with meaningful assets. This article will help you build an optimal charitable giving strategy for the causes you care about and for your financial well-being.

Charitable Giving: The Basics

Charitable giving is the process of donating money, assets, or time to philanthropic organizations you want to support. It often provides meaning and personal fulfillment. You can give through nonprofit organizations and religious institutions. Benefits of charitable giving include:

• Estate planning. You can minimize and manage estate taxes.
• Legacy planning. You can create a lasting family legacy.
• Tax planning. You may be able to reduce taxable income and capital gains taxes.
• Income generation. You may be able to create regular income streams through a trust.

Start With Your Values

The first step in charitable giving is to ask yourself what matters most to you. Start by defining your charitable mission and purpose, then determine what you want your giving to achieve. For some families, education and scholarship funding are paramount. Others focus philanthropic efforts on medical research, poverty relief, and conservation. Your to-do list:

• Write a charitable mission statement. Documenting objectives will help you choose the most suitable organizations and vehicles to achieve your goals. Include your family in the process.
• Determine how much you want to contribute. Many families give a defined percentage of their assets or income.
• Research, evaluate, and select the right charity. Prominent firms that help donors include Charity Navigator, Excellence in Giving, and GuideStar.

Involve Your Family

Philanthropy is a great way to pass on your family’s values to children and grandchildren and talk about your charitable goals with them. Here’s why:

• You build shared purpose. Mutual goals can strengthen family bonds and create lasting traditions.
• You prepare your children for future responsibility. Family involvement in decision making can help your children be good stewards of family wealth and legacy.

Make Giving a Part of Your Wealth Plan

Charitable giving is integral to many of our clients’ financial plans. They often tell us that charitable giving:

• Makes a difference. Families like to put their values into action and see their wealth positively impact people’s lives.
• Creates fulfillment beyond investment performance. Positive returns are great, but not necessarily enough for a meaningful life.

Work With a Financial Planner

Charitable giving can be complex. Some families successfully plan on their own, especially if their goals are straightforward or their giving is limited in scope. However, many find value in a financial advisor’s perspective. A wealth manager can help you:

• Align your giving with your overall financial plan. A charitable giving plan is not a stand-alone endeavor. Philanthropy should be part of your overall financial plan, alongside planning for retirement, education, housing, budgeting, and more.
• Navigate complex tax strategies. Some of our clients work with a tax attorney, estate planning lawyer, or CPA, while others do not. It is best to employ a coordinated team to bring your unique objectives to life.

Charitable Giving Tactics

There’s more than one way to put your charitable plan into action. The most commonly used strategies include:

Donor-advised funds

A donor-advised fund (DAF) can be a strategic tool for optimizing charitable giving. DAFs make it easy to donate. You may:

• Contribute appreciated securities. You’ll get an immediate tax deduction for that year.
• Recommend grants to your favorite charity whenever you decide. You have the flexibility of taking your time to decide which charities to support, so you don’t have to rush your giving decisions.
• Invest and grow tax-free inside the DAF. You can benefit from tax-free growth in the fund, which is a significant advantage over taxable accounts.

Many investment firms offer donor-advised funds with low fees and accessible online platforms.

Donate appreciated assets

You can also donate assets that have gone up in value directly to your charity of choice. This includes stocks, bonds, mutual funds, real estate, and other assets. Benefits include:

• Deductions on fair market value. You can deduct the generally higher market value of the asset, not your original cost.
• No capital gains tax on the appreciation. You don’t pay capital gains tax.
• Tax-free donations to the charity. The charity pays no tax on the donation.

Here’s an example: Let’s say you bought a mutual fund several years ago for $10,000. It’s now worth $50,000. Congratulations! You’ll owe taxes on the $40,000 capital gain if you sell. By contrast, if you donate the stock, you’ll get a $50,000 deduction and pay no capital gains tax. The charity receives the full $50,000.

Make Qualified Charitable Distributions

A Qualified Charitable Distribution (QCD) can be an effective way to support causes and reduce taxes for retirees age 70½ and over. It may allow you to reduce:

• Taxable income by the amount of your donation.
  • By lowering your Adjusted Gross Income (AGI), you may reduce or avoid Medicare premium surcharges and lower taxes on Social Security benefits.
• Estate taxes, if any.
• The tax impact of Required Minimum Distributions.

Leveraging the right giving vehicles can help you make the most of your charitable efforts.

Consider Other Potential Charitable Tools

Charitable Remainder Trusts (CRTs). These tax-exempt tools pay income to your beneficiaries for the term you specify. The trust then distributes the remaining assets to charity. CRTs are irrevocable, so make sure it’s ultimately what you want to do.

Private Foundations. Foundations provide families with control and flexibility over their assets. However, they can be complex and costly to administer.

Critical Charitable Giving Considerations

Now that you know the basics of charitable giving, what’s next?

Address these three critical considerations: give systematically, time your contributions to minimize taxes, and know your deduction limits.

1. Give systematically

Giving shouldn’t be a one-time event. Contributing regularly:

• Integrates charitable giving into your life. You demonstrate a lasting commitment by giving regularly and automatically to the causes you care about.
• Helps organizations plan for the long term. Your predictable funding helps nonprofits develop and sustain effective strategies and programs.

2. Time your giving to minimize taxes

Timing matters. The amount you pay in taxes may depend on when you give.

• Accelerate your giving in a good year. If you expect a high-income year, maybe you’ve sold a business, exercised stock options, or received a big bonus, consider speeding up the timing of your charitable giving.
• Bunch your giving. You’ll get a bigger tax benefit by “bunching” several years’ worth of donations into one year if you’re close to the standard deduction threshold.

3. Know your deduction limits

The IRS limits how much you can deduct each year for charitable contributions. Here’s the latest for 2025 and for 2026 and beyond when new rules take effect.

For the 2025 tax year, existing rules under the Tax Cuts and Jobs Act of 2017 (TCJA) apply:

• Standard deduction: The standard deduction for 2025 is $31,500 for married couples filing jointly and $15,750 for single filers.
• Itemized deduction for charitable contributions: If you itemize deductions, you can deduct cash contributions to public charities up to 60 percent of your adjusted gross income (AGI). Contributions exceeding this limit can be carried forward for up to five years.
• Qualified Charitable Distributions: Individuals aged 70½ and older can exclude up to $108,000 from their gross income by transferring funds directly from their IRA to a qualified charity. This can be a tax-efficient way to meet Required Minimum Distributions (RMDs) without increasing taxable income.

For 2026 and beyond, provisions from the tax law passed in 2025 will take effect:

• Charitable deduction for non-itemizers: This will allow individuals taking the standard deduction to claim a deduction for cash contributions up to $1,000 for singles and $2,000 for married couples filing jointly. Contributions to donor-advised funds or private foundations do not qualify for this deduction.
• Floor on itemized deductions: For those who itemize, a new 0.5 percent floor on charitable contributions will be in effect. Only those exceeding 0.5 percent of AGI will be deductible.
• Top tax bracket deduction cap: Deductions for taxpayers in the highest tax bracket (37 percent) who itemize, including charitable contributions, are capped at 35 percent.
• QCDs: The rules for Qualified Charitable Distributions remain unchanged.

With changes to the tax code occurring over the next two years, it’s a smart idea to meet with your financial and tax advisors to ensure your giving plans are optimized now and in the future.

Summary: Strategies for Optimizing Charitable Giving

Consider these factors as you build your giving strategy:

• Charitable giving basics. Involve your family, make giving part of your wealth management plan, and work with a financial planner.
• Charitable giving considerations. Give systematically, time for maximum impact, and know your deduction limits.
• Charitable giving tools. Invest through donor-advised funds, donate appreciated assets, and make qualified charitable contributions.

Charitable giving is about investing your wealth in organizations you care about. With the right strategy, you can amplify your impact and make a difference.

Glassy Mountain Advisors takes a personal approach to financial planning. We are committed to helping affluent families create their own special memories, achieve financial confidence, and avoid financial pitfalls.

Ready to get started? We at Glassy Mountain Advisors are here to help.

Schedule a complimentary financial planning discussion to learn more about creating a charitable giving plan that makes sense for you and your family.

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Glassy Mountain Advisors does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

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