Smart Giving: Make the Most of Charitable Donations

Giving to organizations and causes you care about can be personally rewarding. But charitable giving can also become part of a broader financial strategy. Thinking ahead about what you give, when you give it, and where the money comes from may help you make a greater impact while keeping your other financial priorities on track

Why Charitable Giving Can Help a Financial Plan 
Generosity is personal, but charitable decisions can affect other areas of your finances, including taxes, investments, retirement income, and estate planning.

Start with what you want your giving to accomplish. Which causes matter most to you? How much can you comfortably give without affecting other goals? Do you prefer to support organizations regularly, make larger gifts occasionally, or leave a charitable legacy?

Once you have a clearer sense of your goals, you can consider how to best fund them.

Look Beyond Cash 
Writing a check or making an online donation is often the simplest way to give. Beginning in 2026, another potential benefit is that taxpayers who don’t itemize deductions may deduct up to $1,000 in qualifying cash donations, or $2,000 for married couples filing jointly. Gifts to donor-advised funds (DAFs) and certain other organizations don’t qualify for this deduction.

But cash isn’t always the most tax-efficient gift. If you own stock or another investment that has increased significantly in value, consider whether donating the investment itself may make more sense. When eligible investments held for more than one year are donated directly to a qualified charity, you generally don’t recognize the capital gain you would have incurred by selling them first. You may also be able to deduct the investment’s fair market value, subject to applicable tax rules and limits.

Here’s the practical difference: If you sell an investment that has grown in value and then donate the proceeds, you may owe capital gains tax on the increase in value. Donating the investment directly to a qualified charity may allow you to avoid that tax while still giving the charity the full value of the investment.

For people who give regularly, a DAF offers another option. A DAF is a charitable account maintained by a sponsoring nonprofit organization. You make an irrevocable contribution to the account and may be eligible for a deduction in that year. You can then recommend grants to eligible charities over time. This can give you flexibility to separate when you make a charitable contribution from when charities ultimately receive the grants.

Make Tax Planning Part of Your Strategy 
Some changes that took effect in 2026 make timing worth considering. Taxpayers who itemize deductions now face a floor of 0.5 percent of adjusted gross income (AGI) for charitable contributions. AGI is essentially your income after certain adjustments and before either the standard or itemized deduction.

In practical terms, this means a small portion of your charitable giving won’t count toward an itemized deduction. Only qualifying contributions above that threshold may be deductible.

That may make a strategy known as bunching worth discussing. Instead of donating the same amount every year, you combine several years of planned giving into one year. A larger contribution may make itemizing more worthwhile, whereas in other years you may take the standard deduction.

A DAF can be useful for this strategy. For instance, you might contribute several years of planned charitable gifts to the fund in one year, and then recommend grants to your favorite charities on your usual schedule.

Keep in mind that charitable deductions are subject to additional limits based on factors including your income, the type of asset you donate, and the organization receiving it.

Don’t Overlook Your IRA 
If you’re 70½ or older, another strategy may be especially useful. A qualified charitable distribution (QCD) allows you to transfer money directly from an eligible IRA to a qualifying charity. In 2026, the annual limit is $111,000 per person.

The distribution generally isn’t included in taxable income. And if you’re required to take annual withdrawals from your IRA, known as required minimum distributions (RMDs), a QCD can count toward that requirement. That can make a QCD worth considering even if you don’t itemize deductions. One important limitation: QCDs cannot currently be made to DAFs.

Focus on the Bigger Picture 
The most tax-efficient gift isn’t automatically the right gift. Your charitable plan also needs to fit your cash flow, retirement needs, family priorities, and long-term goals.

Before making a significant donation, ask:

• Can I make this gift without drawing on money I’ll need for retirement, health care, or emergencies?
• Do I own appreciated investments that might be more advantageous to donate than cash?
• Would making several years of gifts at once improve my tax situation?
• If I’m 70½ or older, would a QCD make sense?
• Do I want some of my charitable giving to continue after my lifetime?
  

Your answers may change over time. Retirement, a business sale, an inheritance, a strong year in the markets, or changes in tax law can create reasons to revisit your strategy.

An annual conversation with your financial advisor and tax professional can help you coordinate your charitable plans with the rest of your finances. That way, your charitable giving can support the causes you care about while still fitting comfortably within your broader financial plan.