How to make the most of charitable donations

Strategies to make a bigger impact over time

The generosity of Vanguard investors continually inspires me, and I'm honored to support and guide my clients with their philanthropic goals.

Giving to charities and causes that are important to us is a profoundly personal and emotional act. It's rewarding to help individuals, communities, and causes we care about—especially during a crisis. That was certainly the case in 2020 when charitable donations in the U.S. hit a record $471 billion.

$471 billion

U.S. charitable donations in 2020

But when we make emotional decisions, we may not always think ahead. That's the biggest mistake I see my clients make when it comes to giving: Even with the best intentions, they can fall short of their charitable goals because they don't have enough information or discuss their plans with an advisor.

Just like you'd plan to save for a home, retirement, or any other long-term goal, you'll need a strategy. Building a formal plan and updating it each year can help you meet your charitable giving goals while maximizing available tax savings.

If you're wondering how much to give, what time of year is best to make your donations, or how much charitable giving can save you in taxes, talking to an advisor is a great place to start.

5 long-term strategies to make the most of your charitable giving

Donate appreciated assets instead of cash

It's easy to donate cash. But giving appreciated securities instead can mean more money going to charities and less to taxes. You won't have to pay capital gains taxes when you donate appreciated assets, and charities don't have to pay taxes when they sell them.

For example, if you wanted to give $10,000, you could give it as a cash gift. But if you have a stock fund that has appreciated to $10,000, consider donating the fund instead. You won't owe capital gains tax on the asset, you'll still receive a charitable deduction, and you'll meet your giving goals—possibly having paid less out of pocket. Learn more about how this works

Bunch your contributions to maximize deductions

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act created a temporary tax deduction that allowed single or married filers to make qualified charitable cash gifts up to $300 without requiring itemized deductions. In 2021, it increased to $600 for married couples filing jointly. The good news is you still don't have to itemize these deductions. However, the tax break is no longer "above the line," which means it won't lower your adjusted gross income (AGI).

Although this tax break can be helpful for smaller gift-giving in the moment, planning ahead and itemizing your deductions may be a better choice. When I'm helping my clients build their giving strategy, I recommend they "bunch” their contributions into 1 year if it yields a higher tax benefit. Donor-advised funds are a great way to bunch contributions and spread out distributions over time.

Carry over your annual deduction limits for up to 5 years

Normally, you can deduct up to 60% of your AGI for the year for your cash donations. (Contributions of appreciated securities are limited to 30% of AGI.)

In 2020 and 2021, thanks to the CARES Act, individual taxpayers could deduct up to 100% of their AGI for their cash contributions. This enhanced deduction limitation is set to expire after 2021.

But if you want to give more, don't hold back! You can carry forward charitable giving above annual deduction limits for up to 5 years.

Ready to rethink your giving strategy?
Our advisors can help.

Ready to rethink your giving strategy?
Our advisors can help.

Consider qualified charitable deductions (QCDs) if you're 72

When you reach age 72 (or 70½ if you turned 70½ before 2020), you're at the required minimum distribution (RMD) age—meaning you'll have to start making a minimum taxable withdrawal annually from your retirement accounts. RMDs were waived during 2020 but are back in effect for 2021.

If you're not itemizing your deductions and you're at RMD age, you may want to consider donating your RMD to a qualified charity through a QCD. It'll satisfy your RMD, and up to $100,000 annually won't count as taxable income. A financial advisor can help you figure out if this approach works for you.

Spread giving throughout the year

While most charities receive the bulk of their donations during the end-of-the-year "Season of Giving,” many organizations need funds year-round. Consistent giving throughout the year or setting up donations on a recurring basis can be helpful. Spreading out your donation over the course of the year rather than giving in bulk can lighten the load—and maybe allow you to budget for a bigger gift overall. With Vanguard Personal Advisor Services®, you can automate your gifting by setting up an automatic withdrawal plan for your QCDs to run monthly, quarterly, or whenever works best for you.

Name a charity as a beneficiary or leave a bequest in your will or trust

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 plans if they're worried about giving too much too early.

Look at it as 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 that are meaningful to you without possibly overextending yourself if you need to spend more on long-term care or other expenses. Additionally, charitable bequests are eligible for the estate tax deduction and can reduce estate taxes.

Wondering what organizations to give to? Vanguard Charitable has tools to help you narrow your search: Donate with Vanguard Charitable Resources.

Want help preserving your wealth?

Working with Vanguard Personal Advisor Services® gives you anytime access to advisors who are fiduciaries—always acting in your best interests. They'll provide investment coaching and work with you to balance multiple financial priorities, including saving for retirement and beyond.

Want help preserving your wealth?

Working with Vanguard Personal Advisor Services® gives you anytime access to advisors who are fiduciaries—always acting in your best interests. They'll provide investment coaching and work with you to balance multiple financial priorities, including saving for retirement and beyond.

All investing is subject to risk, including the possible loss of the money you invest.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Vanguard does not provide legal or tax advice. This information is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Vanguard cannot guarantee that this information is accurate, complete, or timely. Vanguard makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax positions taken in reliance on, such information. We recommend that you consult a tax or financial advisor about your individual situation.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

The services provided to clients who elect to receive ongoing advice will vary based upon the amount of assets in a portfolio. Please review Form CRS and the Vanguard Personal Advisor Services Brochure  for important details about the service, including its asset-based service levels and fee breakpoints.

Research our investment professionals with FINRA's BrokerCheck.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.