Charitable Giving and Taxes: How to Maximize Your Impact and Your Deductions

Giving to charity feels good. Getting a tax deduction for it feels even better. But most people donate without thinking about the tax angle — and end up leaving real money on the table.

Here's how to give smarter, give more, and keep more for yourself at the same time.

The Basics: When Charitable Donations Are Deductible

To deduct charitable contributions, you need to itemize deductions on your tax return. That means your total itemized deductions — including charitable gifts, mortgage interest, state taxes, and medical expenses — must exceed the standard deduction.

For 2026, the standard deduction is:

• $14,600 for single filers
• $29,200 for married filing jointly

If your itemized deductions don't exceed these amounts, you won't get any tax benefit from charitable giving — but there are ways around this.

Bunching: The Strategy That Changes the Math

If you normally give $3,000 per year to charity but your total itemized deductions don't beat the standard deduction, you get zero tax benefit. But if you give $9,000 every three years (bunching three years into one), that year you'll likely itemize and capture the full deduction. The next two years you take the standard deduction.

Same total giving, much larger tax benefit.

Bunching works best when combined with a donor-advised fund.

Donor-Advised Funds: The Flexible Charitable Checkbook

A donor-advised fund (DAF) is a charitable giving account you open at a financial institution like Fidelity Charitable, Schwab Charitable, or Vanguard Charitable.

Here's how it works:

1. You contribute cash or appreciated assets to the DAF
2. You get an immediate tax deduction for the full contribution
3. The money grows tax-free inside the account
4. You distribute grants to charities whenever you want

DAFs are ideal for bunching. Contribute three years of giving in one year, get the big deduction, then distribute to your favorite charities over time — no rush.

Minimum contributions: usually $5,000 to open. No minimum for subsequent contributions or grants.

The Power of Appreciated Stock

One of the most tax-efficient ways to give is donating appreciated stock directly to charity — not cash.

Here's why: if you own stock worth $10,000 that you bought for $2,000, selling it generates an $8,000 capital gain you'd owe taxes on. But if you donate the stock directly, you avoid the capital gains tax AND get a deduction for the full $10,000 fair market value.

The charity sells the stock tax-free and gets $10,000. You get a $10,000 deduction and pay zero capital gains tax. Everyone wins.

This strategy works with:

• Stocks
• Mutual fund shares
• ETF shares
• Real estate (more complex)

Most charities and all donor-advised funds accept appreciated stock donations.

Qualified Charitable Distributions (QCDs)

If you're 70½ or older and have a traditional IRA, you can make a Qualified Charitable Distribution — a direct transfer from your IRA to a charity, up to $105,000 per year for 2026.

The key benefit: QCDs count toward your Required Minimum Distribution (RMD) but aren't included in your taxable income. This is better than taking the RMD and then donating it, because:

1. You avoid income tax on the withdrawn amount
2. The donation doesn't require itemizing to benefit you
3. Lower reported income may reduce taxes on Social Security and Medicare premiums

This is one of the most powerful tax strategies available to retirees.

What Counts as a Deductible Donation

Deductible:

• Cash to qualifying 501(c)(3) organizations
• Check, credit card, payroll deduction
• Property at fair market value
• Appreciated securities
• Vehicle donations (complex — deduction is usually the sale price)

NOT deductible:

• Donations to individuals
• Political contributions
• Raffle tickets or auction items above fair market value
• Time or services
• Donations to foreign organizations (some exceptions)

Recordkeeping Requirements

• Cash under $250: bank record or receipt
• Cash $250 or more: written acknowledgment from the charity
• Non-cash under $250: receipt from the charity
• Non-cash $250-$500: written acknowledgment
• Non-cash over $500: Form 8283
• Non-cash over $5,000: qualified appraisal required

Don't wait until tax time to gather this paperwork. Most charities send acknowledgment letters automatically — save them immediately.

The Volunteer Mileage Deduction

If you volunteer for a qualified charity, you can deduct $0.14 per mile driven for charitable purposes. That's quite low (the standard business mileage rate is much higher), but it's still something. Keep a mileage log.

You cannot deduct the value of your time or services — only out-of-pocket expenses.

Creating a Giving Strategy

Random charitable giving is fine. Strategic giving accomplishes more.

Questions to answer:

1. What causes matter most to you? (Focus beats spreading thin)
2. What's your total annual giving budget?
3. Do you itemize deductions? (If not, consider bunching)
4. Do you have appreciated assets to donate?
5. Are you over 70½ with an IRA? (Consider QCDs)

A simple annual process: choose 2-3 organizations, set up automatic monthly giving, and review your tax situation each October to decide whether to bunch or give additional amounts before year-end.

The Bottom Line

Charitable giving can be a win-win when done thoughtfully:

• Donor-advised funds let you control timing and get big deductions
• Appreciated stock donations avoid capital gains and maximize deductions
• Qualified charitable distributions are the best option for IRA owners over 70½
• Bunching turns small annual gifts into a genuine tax benefit

You'll give more effectively, and keep more of your own money. That's worth thinking about.

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