The Misunderstood Tax Benefits of Charitable Giving

Charitable giving is often seen as a heartfelt act, a way to support causes we care about and make a difference in our communities. But beyond the emotional rewards, charitable giving can also provide valuable financial benefits. Unfortunately, many people misunderstand how the tax code supports generosity and miss out on potential savings.

Let’s explore some of the most common myths and smarter strategies that can help you give more effectively.

Myth #1: Every charitable donation is tax-deductible.

Not quite. While contributions to qualified 501(c)(3) nonprofits are generally deductible, you must itemize your deductions to claim them. With the 2025 standard deduction at $15,000 for single filers and $30,000 for married couples, most households don’t itemize, meaning many charitable gifts offer no tax benefit.

Strategy Tip: Consider bunching your donations. Instead of giving smaller amounts each year, combine several years of donations into one. This can help you surpass the standard deduction and itemize in that year. A Donor-Advised Fund (DAF) can be especially helpful: you get the deduction now and distribute the funds to charities over time.

Myth #2: The best way to donate is with cash.

Cash donations are simple, but not always the most tax-efficient. Donating appreciated assets, such as stocks, mutual funds, or ETFs you’ve held for over a year, can provide double the benefit: you avoid capital gains taxes and can deduct the asset’s full market value if you itemize.

• Example: Donate $10,000 in stock you bought for $4,000, and you avoid tax on the $6,000 gain while deducting the full $10,000.

This strategy works well for investors with highly appreciated assets or those looking to rebalance their portfolios more efficiently.

Myth #3: Once I’m retired, charitable giving doesn’t benefit me.

In reality, retirement can offer even more effective giving strategies. If you’re age 70½ or older, you can make Qualified Charitable Distributions (QCDs) directly from your IRA, up to $105,000 annually as of 2025. These gifts count toward your Required Minimum Distribution (RMD) and are excluded from your taxable income.

Why it matters:

• Reduces your taxable income, which can lower Medicare premiums and taxes on Social Security.
• Helps manage your tax bracket in retirement.
• Shrinks your IRA balance, reducing future RMDs and potentially easing the tax burden on heirs.

Myth #4: Charitable giving is only about deductions.

Giving goes far beyond tax deductions. With the right strategy, charitable contributions can support estate planning, manage portfolio risk, and even improve cash flow.

• From an investment perspective: Donating appreciated assets lets you reduce concentrated stock positions without triggering capital gains tax, helping you shift into a more diversified and tax-efficient portfolio.
• For high-net-worth individuals: Tools like Charitable Remainder Trusts (CRTs), Charitable Lead Trusts (CLTs), and private foundations can support legacy goals while providing advanced tax benefits.

Give With Purpose and Strategy

Charitable giving is a meaningful way to make an impact, and with the right strategy, it can also be a powerful tool for reducing taxes and strengthening your overall financial plan. Whether you’re still working, retired, or planning your legacy, intentional giving can help you support the causes you love while maximizing personal benefits.

Ready to give with greater purpose? Schedule a complimentary consultation with our team today and start building a strategy that makes the most of your generosity, for you and your favorite charities.

William Medcalf, CFP®
Senior Financial Planning Associate, Wiser Wealth Management