As we approach year-end, charitable giving remains one of the most effective and straightforward ways to reduce taxable income. The IRS allows taxpayers to deduct cash contributions up to 60% of their Adjusted Gross Income (AGI) when donating to qualified public charities (IRS Publication 526). Whether you support your church, a local cause, or a national nonprofit, intentional planning can significantly increase your tax benefit.
Using a Donor-Advised Fund for Strategic Giving
For individuals expecting a high-income year or wanting more control over their charitable timeline, a Donor-Advised Fund (DAF) is a powerful tool. A DAF allows you to:
- Make a large tax-deductible contribution in a single year
- Receive the full deduction upfront
- Distribute funds to charities over time
- Donate cash, appreciated securities, or other assets
- Potentially avoid capital gains tax on appreciated assets
This structure simplifies record-keeping and allows you to “pre-fund” future charitable intentions with a single contribution.
Donating Appreciated Stock for a Double Tax Benefit
If you own stock or other securities that have increased in value, donating them directly to a charity often yields greater tax savings than giving cash. When you donate appreciated securities held for more than one year, you can:
- Avoid paying capital gains tax
- Deduct the full fair market value of the asset
Timing & Eligibility Rules to Know
Before gifting appreciated securities, be sure you meet these requirements:
- One-year holding period: Only long-term assets qualify for a full fair market value deduction.
- Itemized deductions required: You must itemize to claim the deduction.
- AGI limitations: Deductions for appreciated securities are generally capped at 30% of AGI, with up to a 5-year carryforward for unused amounts.
- Proper documentation: Obtain written acknowledgment from the charity and retain brokerage transfer records.
Donating Non-Cash Assets (Real Estate, Crypto, Vehicles & More)
Charitable gifts aren’t limited to cash or stock. Many taxpayers donate other types of property, including:
- Real estate
- Cryptocurrency
- Vehicles
- Tangible goods
- Collectibles (subject to IRS valuation rules)
Depending on the asset and its appreciation, the tax benefit may be greater than donating cash—particularly when avoiding capital gains tax while deducting fair market value.
Choosing the Right Strategy
Charitable giving should be incorporated into a larger year-end tax strategy—especially for high-income individuals, business owners, and S corporation shareholders who are already optimizing compensation, deductions, and entity planning.
