Charitable giving can make a meaningful impact — both for the causes you care about and your long-term financial plan. When structured strategically, charitable gifts can help reduce taxes, improve cash-flow efficiency, and support a more holistic wealth strategy. This guide breaks down how charitable tax deductions work, the most effective giving strategies for 2025, and how options like appreciated securities, donor-advised funds, and Qualified Charitable Distributions can help you maximize your generosity while staying aligned with your Total Net Worth Approach.

Charitable giving is an important way to support the organizations and causes that matter most to you. When handled thoughtfully, it can also play a meaningful role in improving your overall tax efficiency. At Winthrop Wealth, we help clients integrate charitable strategies into their Total Net Worth Approach, helping to ensure that gifting decisions supports long-term goals, cash-flow needs, tax planning strategies, and investment alignment.

Because the rules can be complex, this guide explains how the most common charitable strategies work, when they are beneficial, and how to make sure your giving aligns with your financial plan.

How Charitable Deductions Work

To receive a tax deduction for charitable gifts, you typically need to itemize deductions on your tax return. If your itemized deductions fall below the standard deduction, your charitable gifts may not result in a tax benefit unless you use certain planning strategies such as a Qualified Charitable Distribution (QCD) or a Donor-Advised Fund (DAF).

To simplify this further, we group charitable giving strategies into three categories based on age and tax situation.

Bucket 1: For Individuals Under Age 70½ Who Itemize

If you itemize and your deductions exceed the standard deduction, you can receive a full tax benefit for charitable gifts (subject to AGI limits). For many people, donating appreciated securities instead of cash can be even more tax-efficient.

Why appreciated securities can be a smart choice:

• You avoid paying capital gains tax on the appreciation
• You can deduct the full fair market value
• You potentially give more without affecting your cash flow

If your annual charitable gifts are not enough to exceed the standard deduction, a Donor-Advised Fund (DAF) may help. A DAF allows you to “bundle” several years of gifts into one contribution, which may increase your deductions in that year. You can then distribute donations to charities over time.

Bucket 2: For Individuals Age 70½ and Older — Using QCDs

Once you reach age 70½, a Qualified Charitable Distribution (QCD) becomes one of the most powerful charitable planning tools available.

A QCD allows you to make a tax-free gift directly from your IRA to a qualified charity. In 2025, you can donate up to $108,000 this way.

Benefits of using a QCD:

• The gift is excluded from taxable income
• It can count toward your Required Minimum Distribution (RMD)
• It provides a tax benefit even if you take the standard deduction
• It can help lower future RMDs and stabilize retirement cash flow

Many retirees find QCDs to be the most efficient way to support charitable organizations while managing their taxable income.  However, you MUST make the donation directly from the IRA to the charity and report the amounts to your tax preparer so they are accounted for properly.

Bucket 3: Charitable Giving at Death

Charitable intent can also be part of your estate plan. Some assets are significantly more tax-efficient to leave to charity than to family members.

The most efficient assets to donate at death are Income in Respect of a Decedent (IRD) assets, such as IRAs, 401(k)s, and non-qualified annuities. These assets do not receive a step-up in basis at death, meaning heirs would owe tax on withdrawals but charities will not. Donating IRD assets to charity preserves more tax-advantaged assets for your loved ones.

Standard Deduction Reference for 2025

To itemize charitable contributions, your deductions must exceed the standard deduction:

• Single: $15,750
• Married Filing Jointly: $30,000
• Additional for age 65+: $2,000 (single) or $1,600 per spouse

If your deductions fall short of these amounts, a strategy like a QCD or a DAF can help ensure your charitable giving remains tax-efficient.

How AGI Limits Affect Your Deductions

The IRS limits the amount of charitable contributions you can deduct in a single tax year:

• Cash gifts: up to 60% of AGI
• Short-term appreciated assets or inventory: 50% of AGI
• Use-unrelated gifts: 50% of AGI
• Long-term appreciated assets:

– Fair market value deduction: 30% of AGI

– Basis deduction: 50% of AGI

Unused deductions can be carried forward for up to five years.

Examples: How Strategic Giving Works in Practice

These are hypothetical examples and not representative of any specific situation. Your results will vary. 

Example 1: Retired Couple, Ages 72 and 74

Itemized deductions: $14,000

Standard deduction with age adjustments: $33,200

Their $4,000 charitable gift won’t result in a tax benefit because they don’t itemize. However, making the same gift as a QCD avoids income tax on the $4,000 IRA distribution creating a meaningful tax benefit.

Example 2: Couple Ages 59 and 61

Itemized deductions: $14,000

Standard deduction: $30,000

A $4,000 cash gift doesn’t reduce taxes.

But donating $35,000 of appreciated stock (basis $10,000):

• Avoids tax on $25,000 of gains
• Raises deductions to $49,000
• Creates a $19,000 tax benefit
• Can be directed into a DAF for future giving

This strategy is subject to the 30% AGI limit for appreciated assets.

Common Questions About Charitable Giving

We often hear the following questions from clients:

Do charitable donations always reduce taxes?

Not always. You must itemize or use a strategy such as a QCD.

Is donating stock more beneficial than cash?

Often yes. Especially when the stock has appreciated significantly.

How does a Donor-Advised Fund help?

It allows you to bunch several years of giving into one large contribution, potentially increasing your deductions for that year.

Why are QCDs so valuable for retirees?

They reduce taxable income, help manage RMDs, and provide tax benefits without itemizing.

Which assets are best to leave to charity in an estate plan?

IRAs and other IRD assets are typically the most efficient.

The Winthrop Wealth Perspective

Charitable giving is most effective when it is aligned with your overall financial strategy, in our opinion. We follow a Total Net Worth Approach to wealth management that combines both comprehensive financial planning and investment management. Through our Total Net Worth Approach, we can help clients evaluate charitable opportunities within the broader context of their finances including cash flow, tax planning strategies, investments, estate planning strategies, and long-term goals.  For clients who receive both financial planning and investment advisory services under agreement. No strategy assures success or protects against loss. Investing involves risk, including loss of principle.

With the right structure, your charitable giving can create meaningful impact for the causes you care about and support the long-term strength of your financial plan.