The three most tax-efficient ways to give to charity are donating appreciated investments instead of cash, bunching gifts into a donor-advised fund, and making qualified charitable distributions from an IRA once you are 70½ or older. Each can increase your impact while lowering taxes. A financial advisor on Lookout Mountain can match the right tool to your income and giving goals.
When you donate investments held more than one year directly to a charity, you generally avoid capital gains tax on the growth and may deduct the fair market value if you itemize. Then use the cash you would have given to rebuy positions and reset your cost basis.
A donor-advised fund (DAF) lets you contribute several years of giving in one year, take the deduction in that year, and recommend grants to charities over time. Bunching can push you above the standard deduction in the contribution year, then you take the standard deduction in the off years.
IRA owners 70½ and older can send money directly from an IRA to a qualifying charity as a qualified charitable distribution (QCD). The amount is excluded from taxable income, and once you reach required minimum distribution age, QCDs count toward your RMD. The annual QCD limit is indexed for inflation. QCDs cannot go to a donor-advised fund.
Many families combine these: stock gifts to a DAF in a high-income year such as a business sale, then QCDs in retirement for ongoing gifts. The order matters, and the plan should be coordinated with your tax preparer each year.
A family that gives a similar amount every year might contribute three years of gifts in appreciated stock to a donor-advised fund in a year with a bonus or business sale. They itemize that year, avoid capital gains on the donated shares, and then recommend grants to their regular charities over the next three years while taking the standard deduction.
Naming charities as beneficiaries of traditional IRAs can be tax-efficient, because charities pay no income tax on those dollars, while heirs can receive assets that receive more favorable tax treatment.
A direct transfer from an IRA to a qualifying charity by an owner aged 70½ or older. It is excluded from taxable income and can satisfy required minimum distributions.
Yes. Most donor-advised fund sponsors accept appreciated securities, which lets you avoid capital gains and deduct fair market value if you itemize.
Most charitable deductions still require itemizing, but beginning in 2026 non-itemizers can deduct a limited amount of cash gifts made directly to charity, and QCDs reduce taxable income even if you take the standard deduction.
Want your giving to go further? Connect with our financial advisor on Lookout Mountain to coordinate gifts with your tax plan.
This article is for educational purposes only and is not individualized investment, tax or legal advice. Talk with a qualified professional about your specific situation.
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