Tax strategies for charitable contributions

Bunching charitable contributions is the practice of making multiple years' worth of donations in a single year to maximize the deduction in that tax year. This strategy is often used in combination with a donor-advised fund (DAF). If you itemize deductions, you can deduct charitable contributions up to a certain amount based on your adjusted gross income (AGI) and the type of donation (cash vs. appreciated securities). By bunching your charitable contributions in one year, you can increase your itemized deductions and lower your taxable income.

For example, let's say you normally donate $10,000 to charity each year. If your total deductions don't exceed the standard deduction, you may not receive a tax benefit from your charitable giving.

Bunching your charitable contributions might look like this: Instead of giving $10,000 every year, you could give $20,000 every other year. In the year you donate, your deductions may be high enough to itemize and claim that charitable deduction. In the year you don't donate, you could take the standard deduction.

Alternating between itemizing and taking the standard deduction may help reduce your total tax bill over time. The potential benefit comes from crossing the standard deduction threshold in some years while still benefiting from it in others.

If you're considering bunching charitable contributions, you should talk to a financial advisor to see if it's the right strategy for you.

Cash is the simplest way to give. But donating appreciated securities can make your gift go further by helping you avoid capital gains taxes while allowing the charity to receive the full value.

For example, if you wanted to give $10,000, you could give it as a cash gift. But if you have a stock fund whose value has increased to $10,000, consider donating the fund instead. You won't owe capital gains tax on the security, you'll still receive a charitable deduction, typically for the full fair market value of the donated fund, and you'll meet your giving goals—possibly having paid less out of pocket. Additionally, the charity won't have to pay taxes when they sell the security.

A donor-advised fund (DAF) is another great tool if you're making multiple years' worth of donations at once. With a DAF, charitable donations are deposited into the account, and a tax deduction is taken. You can then invest the money within the DAF and the DAF will pay it out to your chosen charities over time.

A DAF can also give you more control over timing. You can claim your tax deduction when it best fits your financial situation, then recommend grants to charities over time based on your goals, cash flow, and giving plan. By working with one of our advisors, you can see if a DAF aligns with your personal giving goals.

If you're age 70½ or older, you may be able to give directly from your IRA to a qualified charity through a qualified charitable distribution (QCD). A QCD can be made after age 70½ even if you're not subject to RMDs yet because you're under age 73.³

For 2026, you can give up to $111,000. A QCD is excluded from your adjusted gross income (AGI), which may affect things like Social Security taxability, IRMAA (income-related monthly adjustment amount), NIIT (net income investment tax), and eligibility for other deductions and credits. If you’re subject to RMDs, it also counts towards your RMD.

If you're considering a QCD, it helps to understand both how it applies to your RMD and what rules come with it.

• The QCD can be of any amount up to the yearly limit regardless of RMD amount. QCDs count dollar-for-dollar toward the RMD.
• If the QCD is less than the RMD, the remaining RMD must still be taken.
• If the QCD is more than the RMD, the current year's RMD is satisfied, but excess amounts do not count towards future years' RMDs (although it will lower the balance of the IRA and therefore reduce future RMDs).

QCDs can offer advantages over cash gifts, but there are a few rules and limitations to keep in mind before you use this strategy:

• You must be at least 70½.²
• They must come from a qualified account. Most IRAs are eligible, but we recommend checking with an advisor about your particular situation.
• They're limited to $111,000 per individual in 2026 (indexed for inflation).
• You can't double-dip (meaning you can't make a QCD and also take a deduction for it).
• You can't make a QCD to a DAF or private foundation.
• They must be made directly by the custodian to the charity. A check from the custodian made out to the charity is sent to the investor for delivery.

Thinking about what may happen after you're gone isn't anyone's favorite topic. However, I often encourage my clients to consider building charitable bequests into their estate plans if they're worried about giving too much too early.

Look at this as an opportunity to create a legacy of giving. Naming a charity as a beneficiary or leaving a bequest in your will or trust allows you to give to causes meaningful to you without overextending yourself in case you need to spend more on long-term care or other expenses. Additionally, charitable bequests are removed from the estate prior to calculating the taxable estate, which could reduce estate taxes for your beneficiaries.