Year-End Charitable Giving: Simple Strategies for Your Financial Plan

Winston Churchill is often quoted as saying “it is more agreeable to have the power to give than to receive.” The holiday season is a good time to think about charitable giving and how it fits into your overall financial plan. Smart charitable planning can help you support causes you care about while also reducing your taxes. The key question isn’t just whether to give, but how to give in ways that make the biggest difference for both the charities you support and your own financial situation.

This year is a particularly good time to think about charitable planning. The recently passed One Big Beautiful Bill Act (OBBBA) includes new rules that affect charitable giving. Also, if you want your donations to count for this tax year, you need to make them by December 31. Learning how to structure your charitable gifts can make generosity an important part of your overall financial strategy.

American household wealth has hit an all-time high

Americans donated $593 billion to charity in 2024, which was 6.3% more than in 2023, according to the National Philanthropic Trust.¹ This shows that charitable giving is still important to many families, even though fewer Americans are donating compared to past years. As shown in the chart, household wealth has grown steadily along with economic growth and rising stock prices. Higher income and wealth, combined with changes to tax laws, have created new reasons to give.

Charitable giving is also important for estate planning. When you leave money to charity, it isn’t subject to estate tax. This means charitable gifts in your will can be a smart way to reduce the taxes your heirs will pay while supporting causes you believe in. For people with large estates that might face estate tax, combining gifts during your lifetime with charitable gifts in your will can significantly lower the tax burden on your family.

Most importantly, charitable giving can help create a lasting legacy, pass on family values to future generations, and reduce taxes over your lifetime. For many families, giving to charity becomes a way to include children and grandchildren in important conversations about values and responsible wealth management. The challenge is that while the desire to give is simple, finding the best approach requires careful planning.

When and how you give matters more than ever

The OBBBA has created important changes for charitable giving. Most significantly, it has increased the number of people who can itemize their tax returns. This is because the state and local tax deduction cap (called the SALT deduction) went up from $10,000 to $40,000. Since charitable contributions only reduce your taxes if you itemize, this makes charitable giving more valuable for tax planning today.

Additionally, there is a limited window from 2025 through 2029 to optimize when and how you make gifts. Starting in 2026, the OBBBA introduces a minimum threshold for charitable deductions. Only donations above 0.5% of your adjusted gross income (AGI) will be deductible. Adjusted gross income is your total income minus certain deductions. For example, if your AGI is $200,000, only donations above $1,000 (which is 0.5% of $200,000) would be deductible.

One strategy some people use to overcome this challenge is called “bunching.” This means combining several years’ worth of charitable gifts into a single tax year to exceed the deduction threshold. This approach has become more popular since the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, which reduced the number of households that itemized their taxes.

Another important consideration is deciding what type of assets to donate. For example, donating investments that have increased significantly in value offers three key tax benefits: you avoid paying capital gains tax from selling them, you remove future growth from your taxable estate, and you get a deduction on your ordinary income. The rules for ordinary income deductions depend on whether the charity is public or private and what your estimated AGI is. This “triple benefit” can be especially valuable during years when you have large capital gains, such as when you receive stock compensation or sell a business, and when you don’t have losses to offset the gains.

Including charitable giving in your portfolio rebalancing can also make your strategy more efficient. Some people prioritize donating appreciated investments from their taxable accounts, then buy similar investments in their tax-deferred retirement accounts. This approach helps maintain your desired investment mix while maximizing tax benefits.

Common ways to make charitable gifts

Different charitable giving methods serve different purposes. The right choice depends on your specific situation and goals. Here are some common examples, though this isn’t a complete list:

Donor-advised funds (DAFs) have become very popular, with more than $250 billion in assets.¹ DAFs work like charitable investment accounts: you make a contribution, receive an immediate tax deduction, and then recommend grants to charities over time. The money can be invested and grow without being taxed while you decide when and where to give. DAFs are especially useful in years when maximizing tax deductions is important.

Under the new tax rules, donors can structure DAF contributions to ensure they exceed the 0.5% AGI minimum threshold described earlier. DAFs are also simpler than other options, making them accessible to more people.

Qualified charitable distributions (QCDs) are another option for people aged 70½ or older who have traditional IRAs. QCDs allow you to transfer up to $108,000 for tax year 2025 directly from your IRA to charities. This can satisfy required minimum distribution rules (the amount you must withdraw from your IRA each year) while excluding the amount from your taxable income. QCDs provide tax benefits whether or not you itemize, so they can be valuable in years when itemizing is less beneficial.

Charitable remainder trusts (CRTs) provide another way to support charitable causes as part of estate planning. With a CRT, you transfer assets into a trust that pays income to you or other beneficiaries for a specified period, with the remainder going to charity. This can be especially useful for investments that have increased significantly in value, since the trust can sell them without you paying immediate capital gains taxes.

As with any trust, careful planning is important. For example, certain retained rights could cause the asset to be included in your taxable estate. Additionally, naming beneficiaries other than yourself or your spouse could trigger gift tax.

For those fortunate enough to have substantial assets and long-term charitable goals, additional options may include:

• Private foundations, which offer maximum control and family governance structures but require more administration, have minimum distribution rules, and pay taxes on investment income

• Charitable lead trusts, which provide income to charity for a period before assets pass to heirs

• Supporting organizations, which work closely with specific public charities

• Pooled income funds offered by certain charitable institutions

These examples represent some of the most common charitable giving methods, but there are additional options and variations that may work better depending on your specific situation. Working with a trusted advisor can help determine which approach best aligns with your goals.

Making charitable giving part of your complete financial plan

The most effective charitable planning integrates giving into your broader financial strategy rather than treating it separately from other financial decisions. This comprehensive approach considers how charitable giving relates to investment management, tax planning, retirement income, and estate planning.

Perhaps most importantly, involving children and grandchildren in charitable decisions creates opportunities to discuss what matters most to your family, why certain causes deserve support, and how to evaluate how well charities use their donations. These conversations can be among the most meaningful aspects of wealth planning, helping ensure that your family’s values and sense of responsibility continue across generations.

The bottom line? With year-end approaching and new tax rules creating both opportunities and considerations, it is important to optimize the timing, structure, and methods for your charitable gifts. This can help maximize both your impact on causes you care about and your financial goals.

1. https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/