Making the Most of Your Gifts and Donations to Charities
As we are entering the last few months of 2025, many of us will take some time to reflect on what we have accomplished over the last twelve months and set new intentions for 2026. The end of the year also brings opportunities to support meaningful causes and maximize tax benefits. Whether it’s making charitable contributions of stock, donating your services, or making cash gifts to your favorite charities, there are ways to implement strategic gifting so that you can align your generosity with your own financial goals.
Here are several ways to consider gifting:
Cash or Checks
This is a simple, straightforward way to provide a gift.
Appreciated Stock
You can gift stock that you own, and the recipient will benefit from any increases in the stock’s value.
- If you donate stock directly to a charity, you will not need to pay taxes on that since you are not benefitting from gains, and in turn, a tax-exempt charity will not incur taxes when they sell the stock.
Qualified Charitable Distributions (QCDs)
For those 70 ½ or older, you can donate to a qualified organization which may be close to your heart while also enjoying the financial benefits made possible by supporting a charitable cause.
- The amount you choose to donate directly from your IRA to a qualified 501(c)(3) charitable organization reduces your required minimum distribution (RMD), and in turn reduces your adjusted gross income (AGI). This helps you by reducing your taxable income, and therefore, your income tax bill.
- In 2025, the maximum annual amount that an individual aged 70 ½ or older can give via a QCD to a qualified charity is $108,000. If you file taxes jointly with your spouse who is over 70 1/2, they can also make a QCD from their own IRA within the same tax year for up to $108,000.
- It’s important to note that the funds must come out of your IRA by your RMD deadline for a QCD to count toward the current year’s minimum and distributions must go directly to the charity.
- Any amount donated above your RMD does not work toward meeting a future year’s requirement. QCDs may be taken from a variety of IRAs, however they may not be taken from an employer plan, such as a 401(k) or a 403(b).
- Additionally, QCDs only apply to taxable amounts. You may not transfer your nondeductible IRA contributions or after-tax rollover funds to charity as a QCD.
In-Kind Donations
In-kind donations are non-monetary donations made to a 501(c)(3) charitable organization. They can be either goods or services.
- Goods may include tangible goods such as furniture, computers, school supplies, food, vehicles, medical supplies, etc., and intangible goods like intellectual property or copyright donations.
- Services may include various types of help such as pro bono work, providing transportation, legal assistance, coaching services, or even donation of event or meeting spaces.
- Non-cash donations can be tax-deductible, but the IRS has rules that you must be careful to follow. For example, property that is donated can be deducted at fair market value, but donations that are more than $5,000 require an appraisal.
- The IRS does not allow for the deduction of time or services donated to a charitable organization but does allow deducting “unreimbursed; directly connected with the services; expenses you had only because of the services you gave; and not personal, living or family expenses.”
- You must keep careful receipts of your in-kind donations. It can be helpful to consult your tax accountant for advice regarding the specific documentation you will need for the goods or services you are donating.
When you are considering the ways in which you may want to implement a gifting strategy, one of the most helpful things you can do is to speak with your financial advisor. They can explain the potential tax benefits for both you and your intended recipients and create a plan that allows you to make meaningful gifts while staying on course to achieve your goals. If you would like more information, please contact us.
