As the year draws to a close, many of us find ourselves reflecting on what we’ve accomplished, what we’re grateful for, and how we can give back. The final weeks of December are not only a season of celebration, but they’re also the last opportunity to make charitable donations that count toward this year’s taxes. A common misconception is that charitable giving simply means writing a check to your local charity or church. In reality, giving can take many forms that range from cash donations to gifts of land, investments, or real estate.
Whether you’re motivated by generosity, community impact, or the desire to maximize tax benefits, there are smart strategies you can still put into action before the end of the year.
Qualified Charitable Distributions (QCDs)
For individuals age 70½ and older, Qualified Charitable Distributions offer a powerful way to give. A QCD allows you to donate directly from your IRA to a qualified charity. Normally, IRA distributions are taxable, but with a QCD you can lower your adjusted gross income while also satisfying required minimum distribution rules. Since the current RMD age is 73 (as of 2025), this approach can help reduce taxable income, which in turn may positively affect eligibility for certain tax credits and even lower the taxation of Social Security. Please note that QCDs are limited to a maximum of $108,000 in 2025 per taxpayer.
Donating Appreciated Assets
If you own highly appreciated assets such as stocks or real estate, that have been held for longer than a year, donating them directly to a charity can be a win-win. Selling these assets would normally trigger capital gains tax, but gifting them allows you to deduct their fair market value while the charity pays no tax on the gain. This strategy not only avoids a tax liability, but also supports a cause you care about. The key detail with this strategy is to not make any sale before transferring it to the charity.
Donor-Advised Funds (DAFs)
For donors who want flexibility, a Donor-Advised Fund can be an excellent tool especially with appreciated assets. A DAF allows you to make a charitable contribution to the account now, receive an immediate tax deduction, and then recommend grants to charities over time. This is particularly useful if you want the deduction this year, but need more time to decide which organizations to support. It also simplifies recordkeeping, since you only need one receipt for tax purposes regardless of how many charities eventually benefit from your gift.
Bunching Donations
If you make annual donations, another strategy worth considering is bunching. This involves consolidating several years’ worth of charitable contributions into a single year so that your itemized deductions exceed the standard deduction. By doing so, you maximize the tax benefit of your giving while still supporting the organizations you care about. Keep in mind that bunching only provides an advantage if you itemize on your tax return. Other common itemized deductions include mortgage interest, state and local taxes, and certain medical expenses.
Why Act Now?
As the year winds down, it’s the perfect time to evaluate whether charitable giving could benefit you. These strategies allow you to reduce your tax burden and also allow you to make a meaningful impact on the world around you. Working with a financial advisor can be especially helpful, as they can guide you through the nuances of giving strategies tailored to your situation. If you have any questions, you can reach out to us at 607-936-3785 and we will be happy to answer any questions.