Utilizing Charitable Giving Tax Deductions

For intentional, purpose-driven families, charitable giving tax deductions and the act of giving are a core component of a sound and fulfilling financial life. Your wealth represents influence, and you want to use that influence to support the causes you care about most. 

A well-designed giving strategy can help you express your generosity while aligning with your goals for retirement income, legacy building, and tax-efficient charitable planning. 

With significant federal tax law changes approaching in 2026, planning considerations are important to review. This guide offers a framework for donors at all income levels, combining IRS rules for charitable deductions with strategic planning insights. We believe in providing clear guidance that supports your generosity, with the goal of making sure your heartfelt contributions deliver the greatest possible financial and philanthropic return. 

For intentional, purpose-driven families, charitable giving tax deductions and the act of giving are a core component of a sound and fulfilling financial life. Your wealth represents influence, and you want to use that influence to support the causes you care about most. 

A well-designed giving strategy can help you express your generosity while aligning with your goals for retirement income, legacy building, and tax-efficient charitable planning. 

With significant federal tax law changes approaching in 2026, planning considerations are important to review. This guide offers a framework for donors at all income levels, combining IRS rules for charitable deductions with strategic planning insights. We believe in providing clear guidance that supports your generosity, with the goal of making sure your heartfelt contributions deliver the greatest possible financial and philanthropic return. 

A charitable contribution deduction lowers your federal taxable income, which in turn reduces your overall tax bill. This deduction is available only for gifts made to a qualified 501(c)(3) organization. Gifts to individuals or non-qualified entities (like most political organizations or personal crowdfunding efforts) are not deductible. 

The ability to claim a deduction depends on whether you itemize deductions for donations on Schedule A of your tax return. 

▪︎ To Itemize: Your total eligible itemized deductions (including state and local taxes, mortgage interest, and medical expenses, plus your charitable contributions) must exceed the federal standard deduction amount for the year. 

▪︎ 2025 Thresholds: For the 2025 tax year, the standard deduction for joint filers is $30,000, and $15,000 for single filers. 

For tax planning, it is important to know that the amount of the charitable contribution deduction you can claim each year is limited based on a percentage of your AGI. 

▪︎ Cash: Generally limited to 60% of AGI. 

▪︎ Appreciated Assets (Stock, Property): Generally limited to 30% of AGI. 

If your giving exceeds these AGI limits in a single year, the IRS allows you to use the excess amount as a deduction carryover for up to five subsequent tax years. This rule is crucial for those making a large, one-time contribution. 

Sound financial practice requires clear records. For any single donation of $250 or more, you must obtain and keep a contemporaneous written acknowledgment from the qualified charity. 

For non-cash charitable contributions like property or art, additional rules apply:  

▪︎ IRS Form 8283: You must file this form if your total non-cash deductions exceed $500. 

▪︎ Appraisal Requirements: For any non-cash item or group of similar items valued over $5,000, you must obtain a qualified written appraisal. For donations over $500,000, the appraisal must be attached to your return. This strict requirement helps you avoid common filing mistakes that can lead to IRS scrutiny. 

Giving cash is straightforward, but it is rarely the most tax-efficient method. The most significant tax efficiencies often come not from writing a check, but from thoughtfully utilizing specialized assets and vehicles to maximize your contribution and minimize your tax burden. 

A DAF is essentially a personal charitable savings account. By starting a DAF, donors can separate the timing of their tax deduction from the timing of their charitable grants. 

▪︎ How DAFs Work: You contribute assets to the DAF (e.g., cash or appreciated stock) and receive an immediate tax deduction in the year the contribution is made. The funds are invested tax-free and grow over time. You then recommend grants from the DAF to charities on your own timeline. 

▪︎ Key Considerations: This giving vehicle enables bunching charitable contributions, allowing you to combine two or three years of giving into one year to potentially push your itemized deductions over the standard deduction threshold. This allows you to claim a large deduction now, while distributing grants annually for years to come. However, this strategy requires careful planning and commitment, as funds are typically irrevocable once contributed, and you may have less flexibility with timing or amounts of future grants. 

A DAF is essentially a personal charitable savings account. By starting a DAF, donors can separate the timing of their tax deduction from the timing of their charitable grants. 

▪︎ How DAFs Work: You contribute assets to the DAF (e.g., cash or appreciated stock) and receive an immediate tax deduction in the year the contribution is made. The funds are invested tax-free and grow over time. You then recommend grants from the DAF to charities on your own timeline. 

▪︎ Key Considerations: This giving vehicle enables bunching charitable contributions, allowing you to combine two or three years of giving into one year to potentially push your itemized deductions over the standard deduction threshold. This allows you to claim a large deduction now, while distributing grants annually for years to come. However, this strategy requires careful planning and commitment, as funds are typically irrevocable once contributed, and you may have less flexibility with timing or amounts of future grants. 

Donating appreciated assets is one of the clearest paths to double tax savings. We believe this strategy can be essential for any long-term investor with concentrated stock holdings or highly valued securities. By being intentional about what you give, you can provide greater support to your charities while also gaining significant personal tax efficiencies.  

▪︎ How it Works: If you own publicly traded stock or mutual funds that have significantly increased in value and you have held them for more than one year, you can donate them directly to a qualified charity or DAF. 

▪︎ Key Considerations: One benefit of this approach is receiving a tax deduction for the full fair market value of the asset (subject to AGI limits) and you avoid paying capital gains tax on the appreciation, which you would incur if you sold the asset first and donated the cash. However, the rules around valuation and timing can be complex, and the strategy may not be suitable for all donors. 

For sophisticated donors, even complex holdings can be used for giving. These specialized gifts require coordinated planning between your financial advisor, your tax professional, and the receiving charity. 

▪︎ Donating Cryptocurrency to Charity: Like stock, highly appreciated crypto can be donated to avoid the capital gains tax you would owe upon sale. You receive a deduction based on the fair market value at the time of the gift. 

▪︎ Real Estate Charitable Donation: Donating residential or commercial property (especially illiquid real estate) can provide a significant deduction and avoid capital gains, though this requires careful planning and a qualified appraisal. 

▪︎ Private Business Interests: Complex gifts of private stock or partnership interests can be coordinated as part of a liquidity or estate planning event. 

For high-impact donors, the most substantial giving often comes through long-term planning and incorporating charitable tools into your estate. We help clients integrate philanthropy into their long-term financial architecture.

Creating a lasting legacy requires you to plan beyond your lifetime. For many, the biggest gift comes through long-term planning that aligns your assets with your values and minimizes taxes for your heirs. 

▪︎ Charitable Remainder Trusts (CRTs): A CRT allows you to contribute assets into a trust and receive income from that trust for life or a set term, with the remaining principal going to charity upon your passing. This provides an upfront tax deduction, future income, and a lasting legacy. 

▪︎ IRA Charitable Beneficiaries: Naming a charity as a beneficiary of your IRA is often the most tax-efficient way to leave a legacy, as these accounts would otherwise be subject to income tax upon distribution to non-spouse heirs. 

Given the high standard deduction amounts, many high-income earners may not benefit from a deduction every year.  

We help clients implement a bunching charitable contributions strategy by making one large gift to a DAF in a high-income year (or a year with a desired liquidity event). This allows the itemized deductions to exceed the standard deduction amount for that year. In subsequent years, the client reverts to the standard deduction while still granting funds from their DAF to maintain consistent support for their charities. This strategy maximizes the tax benefit over a multi-year period. 

For those in the Denver and surrounding area, state-level incentives can stack with federal benefits. Colorado charitable tax credit programs provide a direct credit against your state tax bill for certain contributions:  

▪︎ Child Care Contribution Credit: Provides a nonrefundable credit equal to 50% of the monetary contribution made to a qualifying Colorado childcare facility. 

▪︎ Colorado Homeless Contribution Credit: Provides a nonrefundable credit equal to 25% (or 30% in certain areas) of the contribution to an approved nonprofit organization focused on homelessness. 

Important Note: The amount of your contribution eligible for a federal deduction or state subtraction may be reduced if you receive a state tax credit as a result of the contribution. Coordinated planning with your financial advisor and tax professional is necessary to determine the optimal strategy. 

We believe in building confidence by pointing out common pitfalls. Even the most generous gifts can be disallowed if the paperwork is not precise. We help you avoid mistakes that can trigger IRS scrutiny and undermine the tax efficiency of your giving. 

▪︎ Missing Appraisals: Failing to obtain a qualified appraisal for single or grouped non-cash items valued over $5,000. 

▪︎ Forgetting Documentation: Not obtaining the written acknowledgment for gifts of $250 or more. 

▪︎ Donating to Non-Qualified Organizations: Giving to an entity that is not officially recognized as a 501(c)(3) public charity. 

▪︎ Misunderstanding Crypto Valuation Rules: Failing to use the fair market value at the time of the gift, or lacking proper substantiation for the transfer. 

Good planning is done with you, not for you. Our advisors guide you through weighing the tradeoffs of each approach, blending technical knowledge with your personal giving goals. 

▪︎ Timing of Appreciated Assets: The ideal time to gift appreciated assets is before any planned sale or liquidity event, maximizing the tax-avoidance benefit. 

▪︎ Coordinating Charitable Giving with Roth Conversions: If you are nearing retirement, using charitable giving to offset income from a planned Roth conversion can be a highly tax-efficient method to transition funds into tax-free status. 

▪︎ When Not to Use a DAF: While powerful, a DAF cannot receive a QCD, nor can you benefit from state-specific charitable tax credits if the funds flow through a DAF. These limitations require careful weighing of tradeoffs. 

Notice: The concepts in this blog are intended for educational purposes only. They may not be suitable for your particular situation. The suitability of any specific product or strategy will be dependent upon your particular situation.  You should consult with his or her attorney, tax advisor or accountant before implementing any strategy covered in this blog.