I can’t tell if it’s the Christmas spirit or simply procrastination that leads retirees to make a tax-deductible charitable gift at the end of the calendar year, but December has always been a popular month for giving.
All jokes aside, charitable giving (and the organizations it supports) is a huge component of our society. In fact, in 2024, individuals gave over $392 billion to charitable organizations.
And while the intent behind generosity is always the most important aspect, there is no denying the potential tax benefits that can accompany charitable giving. Yet the tax rules keep changing!
Between the sweeping changes of the 2017 Tax Cuts and Jobs Act (TCJA) and the smaller, but still impactful, adjustments from the OBBBA in 2025, keeping these rules straight is not for the weary.
So here is a crash course on how taxes and charitable giving are connected, along with the top three charitable giving tax strategies for retirees.
How Charitable Giving Affects Your Taxes
First, we need to establish a basic understanding of how deductions work on income tax returns.
All taxpayers are entitled to the standard deduction. In 2025, it's $30,000 for married filers and $15,000 for single filers.
The standard deduction was nearly doubled in 2017 via the TCJA, and as a result, the vast majority of Americans claim the standard deduction on their taxes. However, if you have enough itemized deductions, you can add them up and claim an itemized deduction instead of the standard deduction amount.
Itemized deductions are specific expenses such as:
- Medical Expenses
- State and Local Taxes
- Home Mortgage Interest
- And…Charitable Giving
Let’s pretend you are filing a single tax return and you gave $5,000 to your favorite charitable organization. You add this amount to your other itemized deductions, and the total comes to $11,750.
This means you would be better off taking the $15,000 standard deduction available to single filers rather than claiming your $11,750 of itemized deductions, since you receive the greater of the two.
In this scenario, you did not receive any tax benefit for your charitable giving.
Now, let’s dive into the top three strategies retirees can use to receive tax benefits on their charitable contributions.
Strategy #1: Donor-Advised Funds
Optimizing your finances often requires navigating a variety of abbreviations, and a donor-advised fund (DAF) is no exception.
That said, once you get past the jargon, you’ll find that most of these strategies are fairly straightforward at their core. A DAF is no different. Think of a DAF as a cost-effective way to set up your own charitable foundation.
While donor-advised funds can certainly accommodate very large gifts, they also have practical uses for the charitably inclined who aren’t shopping for their own private island. Here are two DAF strategies:
1. Combating Unusually Large Income Years
Let’s imagine for a moment that you saved consistently over the course of your career in your company 401(k) plan: maxing out contributions and taking full advantage of company matching. This was a phenomenal tax benefit at the time but comes with a tax bill when those dollars are used in retirement.
Now imagine you need to replace a vehicle, and you pull an extra $75,000 from your 401(k) in retirement because you prefer to avoid debt. This may be a financially sound move that you can easily afford, but are you prepared for the tax implications? That large withdrawal could very well bump you into a higher income tax bracket.
One of the most effective strategies to combat a big income tax year is to pull as many deductions as possible into that same tax year, when they carry the most value. Let’s say you typically give $10,000 per year to the charitable organizations you care most about. When combined with your other potential itemized deductions, you still aren’t able to itemize and instead take the standard deduction—making the $10,000 gift irrelevant for tax purposes.
When combined with the other categories that make up your itemized deductions, you aren't able to itemize and instead take the standard deduction. This makes the $10,000 gift to charity irrelevant for tax purposes. Instead of giving $10,000 per year and receiving no tax benefit, you can contribute five years’ worth of charitable giving ($50,000) all at once to a DAF. This gives you a $50,000 tax deduction during a high-income year.
In the following years, you can continue taking the standard deduction you were going to take anyway. And here’s where the DAF really shines: implementation. You remain in control of recommending grants from the DAF, allowing you to continue giving $10,000 per year to your charities.
This is helpful because it prevents you from having to give the full $50,000 to one charity all in a single year, which may be difficult for some organizations to absorb. This donor-advised strategy allowed you to:
- Take a deduction you would not have received otherwise
- Receive the tax benefit in your highest income tax year, when it's worth the most
- Continue your normal cadence of giving
2. Bunching Gifts
Now let’s look at a normal-income year, in which you continue giving your typical $10,000 per year to charity.
As before, after adding up your itemized deductions, your total remains below the $30,000 standard deduction for married filing jointly in 2025 - meaning you receive no tax benefit for your gifts.
Here’s where the DAF comes in again. Instead of giving $10,000 per year, you contribute $30,000 (three years’ worth of giving) to a DAF, and then continue your normal cadence of donations from the fund.
When combined with your other itemized deductions, such as mortgage interest and property taxes, you now exceed the standard deduction amount and receive a tax benefit for your giving.
Over time, this strategy might look like this:
| Year | Current Scenario | Bunching Strategy |
| 2025 | Standard Deduction | Gift $30,000 to DAF and get extra tax benefit |
| 2026 | Standard Deduction | Standard Deduction |
| 2027 | Standard Deduction | Standard Deduction |
| 2028 | Standard Deduction | Gift $30,000 to DAF and get extra tax benefit |
| 2029 | Standard Deduction | Standard Deduction |
| 2030 | Standard Deduction | Standard Deduction |
With the bunching strategy, the DAF allows you to receive tax benefits every third year while maintaining the same amount and cadence of giving.
Strategy #2: Gifting Highly Appreciated Assets
As you invest for your future and your assets grow, you become keenly aware of how capital gains taxes work. Capital gains are the growth in value of an investment and are realized when you sell a position.
For example, if you purchased XYZ stock for $10 and it grew to $15, your capital gain would be $5. This $5 gain is taxable, although at a favorable tax rate compared to ordinary income. So, if you purchased XYZ stock for $10 and it grew to $15 and you sold it, your capital gain would be $5. This $5 of capital gain is taxable,
Here’s how this applies to charitable giving: Most people think of giving cash to charity, but you also have the option to give assets such as stocks, mutual funds, or ETFs instead.
This strategy suggests that instead of giving cash (which you’ve already paid taxes on), you transfer appreciated assets directly to charity.
By doing so, you avoid the capital gains taxes you would have owed if you sold the stock and then donated the cash. From the charity’s perspective, they can sell the shares tax-free because they are a tax-exempt organization.
It’s a win-win: You avoid capital gains tax, and the charity receives the full value.
Strategy #3: Qualified Charitable Distributions
Stick with me here, and don’t let the acronyms scare you, especially if you are over 70.5 years old. Yes, 70.5 is correct, and no, I have no idea why the IRS chose that age.
Regardless of the seemingly random age limitation, Qualified Charitable Distributions (QCDs) allow you to give to charity directly from your IRA. This is important because of the tax attributes of an IRA, both while contributing and while withdrawing in retirement.
When you contribute to a retirement account during your working years, you typically receive a tax deduction. For example:
- If you are in the 24% tax bracket
- And you contribute $10,000
- You save $2,400 in taxes
But when withdrawing those funds in retirement, you will owe taxes at your current marginal rate. QCDs change the game: they allow you to give directly to charity from your IRA in retirement, avoiding the tax on withdrawal.
Even better:
- QCDs count toward your Required Minimum Distribution (RMD)
- QCDs do not show up as income on your tax return
- This can help keep your Modified Adjusted Gross Income below IRMAA thresholds (which impact Medicare Part B and D premiums)
So...What’s The Best Strategy?
It depends on:
- Where your taxable income fall this year and in future years
- What assets you have available to gift
- Whether you’ve started RMDs
- And many other factors
If you are approaching or in retirement, chances are taxes are one of your largest annual expenses.
So, if you want to make an impact in your community with your hard-earned money and receive a meaningful tax benefit for doing so, click here to set up a a call with one of our experienced CFP® professionals at Quantum Financial Planning.