YEAR-END CHARITABLE GIVING: STRATEGIC APPROACHES FOR MAXIMUM IMPACT
Winston Churchill is often credited with saying that "it is more agreeable to have the power to give
than to receive." As the holiday season approaches, many individuals take time to consider how
charitable contributions fit within their broader financial strategy. Strategic planning around
philanthropy can help achieve both charitable objectives and improved tax outcomes. The key
consideration extends beyond simply deciding to give—it involves determining the most effective
methods to maximize support for meaningful causes while enhancing your overall financial position.
Current circumstances create a compelling moment to evaluate charitable strategies. Recent
legislation, including the One Big Beautiful Bill Act (OBBBA), introduces provisions that affect these
decisions. Furthermore, with the December 31 deadline for contributions to count toward this tax
year, now is an opportune time to assess your approach. Strategic structuring of charitable
contributions can elevate philanthropy into a fundamental component of comprehensive financial
planning.
NET WORTH AMONG HOUSEHOLDS HAS CLIMBED TO UNPRECEDENTED LEVELS
Charitable contributions from Americans totaled $593 billion in 2024, representing a 6.3% rise from the prior year, based on data from the National Philanthropic Trust.
This demonstrates that philanthropy continues to hold significant importance for numerous
households, despite a declining percentage of Americans making donations in recent years. The
accompanying chart illustrates how household net worth has grown consistently alongside broader
economic expansion and equity market gains. Rising income and accumulated wealth, combined
with modifications to tax legislation, have generated fresh incentives for charitable activity.
Philanthropy serves a valuable function in estate planning as well. Charitable bequests avoid estate taxation, making them a tax-efficient method to support preferred causes while reducing estate tax obligations. For individuals whose estates exceed thresholds subject to estate tax, combining lifetime donations with charitable bequests can substantially decrease the tax burden passed to beneficiaries.
Beyond financial considerations, charitable giving enables families to establish lasting legacies, transmit core values across generations, and minimize lifetime tax liability. For numerous families, philanthropy provides opportunities to engage children and grandchildren in substantive conversations about principles and responsible stewardship. The complexity for investors lies in the fact that while the motivation to give may be clear, identifying the optimal approach demands careful consideration.
Household Net Worth
Federal Reserve Z.1 financial accounts report for the U.S. The net worth of households and nonprofits.
STRATEGIC TIMING AND STRUCTURING HAVE HEIGHTED IMPORTANCE
The OBBBA introduces significant modifications affecting charitable contributions. Notably, it expands the population able to itemize tax returns by raising the state and local tax (SALT) deduction cap from $10,000 to $40,000. Given that charitable contributions qualify for tax deductions only when itemizing, this change elevates their significance in contemporary tax planning.
Furthermore, a limited timeframe exists from 2025 through 2029 to optimize when and how gifts are structured. Beginning in 2026, the OBBBA establishes a floor for charitable deductions for those who itemize at 0.5% of adjusted gross income (AGI). Consequently, only donations exceeding 0.5% of AGI will qualify for deduction. For an individual with $200,000 in AGI, as an illustration, only contributions beyond $1,000 (0.5% of $200,000) would be deductible.
One approach some investors employ to address this limitation involves “bunching,” which consolidates multiple years’ worth of charitable contributions into one tax year to surpass the deduction threshold. This technique has gained traction since the 2017 Tax Cuts and Jobs Act approximately doubled the standard deduction, thereby reducing the proportion of households that itemized.
Selecting which assets to donate represents another critical factor. For instance, donating significantly appreciated securities provides three distinct tax advantages: it eliminates capital gains tax from a direct sale, excludes future appreciation from the gross estate, and generates a deduction against ordinary income. For ordinary income deductions, factors to evaluate include whether the receiving organization is a public or private charity and the donor’s projected AGI. This “triple benefit” proves particularly valuable during years with substantial capital gains, such as when equity compensation vests or following the sale of a business, especially when offsetting losses are unavailable.
Incorporating charitable giving into portfolio rebalancing activities can further improve efficiency. Some investors prioritize donating appreciated assets from taxable accounts, then replace those positions through acquisitions in tax-deferred accounts. This method preserves the intended asset allocation while optimizing tax advantages.
COMMON STRUCTURES FOR CHARITABLE CONTRIBUTIONS
Various charitable vehicles fulfill distinct purposes, and choosing the appropriate option depends on individual circumstances and objectives. Below are several prevalent examples, though this list is not comprehensive:
Donor Advised Funds (DAFs) have experienced substantial growth, with total assets surpassing $250 billion.
DAFs operate similarly to charitable investment accounts: contributions generate immediate tax deductions, and donors subsequently recommend grants to charities over time. Assets can grow tax-free through investment while donors determine timing and recipients. DAFs prove especially beneficial during years when maximizing deductions holds particular importance.
Under current tax regulations, donors can structure DAF contributions to ensure they surpass the 0.5% AGI floor threshold previously described. DAFs also offer greater simplicity compared to alternative structures, making them accessible to broader donor populations.
Qualified charitable distributions (QCDs) present another avenue for individuals aged 70½ or older holding traditional IRAs. QCDs permit direct transfers up to $108,000 for tax year 2025 from IRAs to charitable organizations. These distributions can fulfill required minimum distribution (RMD) obligations while excluding the amount from taxable income. QCDs deliver tax benefits independent of itemization status, making them valuable during years when itemized deductions offer fewer advantages.
Charitable remainder trusts (CRTs) offer an additional mechanism to support philanthropic goals within estate planning frameworks. Through a CRT, assets transfer into a trust providing income to beneficiaries for a designated period, with remaining assets ultimately directed to charity. This structure can be particularly beneficial for highly appreciated assets, as the trust can liquidate them without the grantor recognizing immediate capital gains taxes.
As with other trust vehicles, careful attention to structure is essential. For instance, certain retained powers might trigger inclusion of assets in the grantor’s gross estate. Furthermore, designating beneficiaries other than the grantor or spouse could generate gift tax consequences.
For individuals with considerable assets and extended philanthropic horizons, additional considerations might include:
- Private foundations, which provide maximum control and family governance frameworks but involve higher administrative obligations, minimum distribution requirements, and excise taxes on investment income.
- Charitable lead trusts, which distribute income to charity for a defined period before transferring assets to heirs.
- Supporting organizations, which collaborate closely with particular public charities.
- Pooled income funds provided by select charitable institutions.
These examples represent commonly utilized charitable vehicles, though additional options and variations may prove suitable depending on specific circumstances. Collaborating with a trusted advisor can help identify which approach best supports your objectives.
INTEGRATING PHILANTHROPY INTO HOLISTIC FINANCIAL PLANNING
The most successful charitable planning incorporates giving into your comprehensive financial strategy rather than treating it as an isolated activity. This integrated approach examines how charitable contributions interact with investment management, tax planning, retirement income strategies, and estate planning.
Perhaps most significantly, engaging children and grandchildren in charitable decision-making generates opportunities for meaningful discussions about family priorities, the rationale for supporting particular causes, and methods for assessing nonprofit effectiveness. These conversations often constitute the most valuable elements of wealth planning, helping ensure your family’s principles and commitment to stewardship endure across generations.
The bottom line? As year-end nears and recent tax legislation creates both opportunities and complexities, thoughtful attention to the timing, structure, and vehicles for charitable gifts is essential. Strategic planning can enhance both your philanthropic impact and your financial outcomes.
A well‑timed, well‑structured gift can help you finish the year with purpose and confidence. Whether you’re considering a direct gift of appreciated assets, contributing to a donor‑advised fund, or exploring qualified charitable distributions, taking a few moments to plan can make your giving more effective and tax‑efficient. Reach out to me today to review your options—you may be able to amplify your impact, support the causes you care about, and secure financial benefits all at once.
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CHRIS WARD, CFP®
Chris has been helping clients as a Financial Advisor since 2007 and established EntryPoint Wealth Management as an opportunity to offer clients access to his best partnership for financial advice. He works as an integrated partner with you and your financial life, to help you better your financial situation and achieve your goals.
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