Making the Most of Year-End Charitable Giving

As the season of gratitude approaches, many families take time to reflect on what they value most—and how they can “give back”. Whether you give regularly to a favorite charity or are looking to make a larger year-end gift, thoughtful planning can help ensure your generosity has the greatest possible impact.

Give Strategically: The Power of Tax-Efficient Giving

When you give in a tax-efficient way, you can stretch each charitable dollar further. For example, a $25,000 gift made directly to charity through a Qualified Charitable Distribution (QCD) from an IRA gives the organization the full $25,000 of spending value. That same $25,000 taken as a taxable IRA distribution for personal use, however, may yield only $15,750 after taxes for someone in the 37% marginal bracket—reducing your spending power by more than a third.

Fortunately, there are several strategies and charitable vehicles that can help you give more effectively depending on your circumstances. These include Qualified Charitable Distributions, donations of appreciated securities, and Donor-Advised Funds. In some cases, combining these strategies can provide even greater benefits.

Qualified Charitable Distributions (QCDs)

For individuals age 70½ and older, a Qualified Charitable Distribution allows you to donate up to $108,000 per year (per IRA owner in 2025) directly from your IRA to a qualified charity. The power of this strategy is twofold: the amount donated counts toward your Required Minimum Distribution (RMD) and is also excluded from your taxable income—a valuable benefit if you don’t itemize deductions or wish to keep your adjusted gross income (AGI) lower.

Because Traditional IRA assets are among the least tax-efficient to leave heirs (distributions are taxed as ordinary income and often must be distributed over an accelerated timeframe), using these funds for charitable giving can also make sense as part of a long-term estate strategy. Note, however, that QCDs cannot be made to Donor-Advised Funds or private foundations.

Donating Appreciated Securities

If you hold investments that have significantly appreciated in value, donating them directly to charity or Donor-Advised Fund can provide a double tax benefit. You may receive a charitable deduction for the fair market value (if you itemize), and you avoid paying capital gains tax on the appreciated amount.

This can also be a smart way to reduce concentrated positions in your portfolio without triggering a taxable sale. If you want to maintain exposure to the same investment, you can donate your highest-appreciated shares and repurchase the security with cash—effectively resetting your cost basis.

Donor-Advised Funds: Your Personal Giving Fund

A Donor-Advised Fund (DAF) allows you to establish your own “mini foundation” without the administrative burden or required size of a private foundation. You contribute cash or appreciated assets to your DAF, take an immediate tax deduction (if you itemize), and then recommend grants to qualified public charities over time.

This approach can be particularly helpful if you wish to “bunch” charitable contributions—making a larger gift in a single year to maximize deductions, then distributing funds to charities gradually in future years.

Looking Ahead: What’s Changing for 2025 and 2026

Under the tax provisions in the One Big Beautiful Bill Act (the “OBBBA”), your charitable giving strategies may be impacted over the next two years. Here are a few planning items we think are important to know and possible actions you can take to maximize giving while minimizing taxes.

2025 Highlights

• Temporary Increase to SALT Deductions: Some households may see a temporary increase in their state and local tax deduction limit. These temporary SALT deduction increases are scheduled to be in effect from 2025 through the 2029 tax years. The increased SALT deductions are phased out for households with Modified Adjusted Gross Income (MAGI) over $250,000 (Single) or $500,000 (Married Filing Jointly).

TIP: This could make 2025 an advantageous year for those who itemize and are considering larger charitable gifts.

2026 Highlights

• Partial Charitable Deduction for Non-Itemizers: Beginning in 2026, non-itemizers may deduct up to $1,000 (Single) or $2,000 (Married Filing Jointly) for cash donations to qualified charities (excluding Donor-Advised Funds).
• New “Floor” for Charitable Deductions: Only charitable contributions exceeding 0.5% of AGI are eligible to be itemized. For example, if your AGI is $250,000, only charitable contributions exceeding $1,250 would be deductible in your itemized deductions.
• Cap on Itemized Deductions for High Earners: For taxpayers in the top tax bracket (37%), a new cap on itemized deductions reduces the tax benefit of each dollar of itemized deductions. For these taxpayers, deductions that would normally reduce their income by 37% will only reduce their income by a maximum of 35%.  

TIP: Because of these changes, high earners who use strategies like charitable bunching may find it advantageous to consider accelerating their giving in 2025, before the new caps take effect. Meanwhile, strategies like Qualified Charitable Distributions, which reduce taxable income dollar-for-dollar will remain attractive for eligible donors.

Putting It All Together

Thoughtful charitable planning can help align your financial resources with your personal values while optimizing your tax situation. Maximizing the tax efficiency of your charitable giving is a win-win – stretching your donated dollars even further. As laws evolve and your circumstances change, revisiting your giving strategy each year—especially at year-end—can help ensure your generosity continues to make the greatest impact.

If you’d like to discuss which charitable giving strategies may fit your goals, please reach out to our team at Sterling Wealth Management. We are always here to help!

Sources & Disclosures

Data points are accurate as of publication date but subject to revisions. Economic forecasts represent professional opinions of the specific entities and economists and are not guarantees of future performance.

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Risks: Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful. Diversification neither assures a profit nor guarantees against loss in a declining market.