Year-End Charitable Giving: Smart Strategies That Maximize Your Impact

As the holiday season unfolds, many of us find ourselves reflecting on what matters most, including how we can support the causes and communities we care about.

But here's the thing: thoughtful charitable planning isn't just about generosity. When done strategically, it can also strengthen your overall financial picture. The question isn't simply whether to give, but how to give in ways that maximize both your philanthropic impact and your financial goals.

This year brings unique considerations. The recently passed One Big Beautiful Bill Act (OBBBA) includes provisions that affect charitable giving strategies, and with the December 31 deadline approaching, now is the time to review your approach.

Why This Matters Now

Americans gave $593 billion to charity in 2024, a 6.3% increase from the prior year, according to the National Philanthropic Trust. Charitable giving clearly remains an important value for many households, even as the percentage of Americans who donate has declined in recent years.

At the same time, household net worth has grown alongside economic expansion and stock market gains. This combination of increased wealth and recent changes to the tax code has created new incentives, and new opportunities, for strategic giving.

Key Changes Under the OBBBA

The OBBBA has introduced important changes that affect charitable giving strategy:

More people can benefit from itemizing. The state and local tax (SALT) deduction cap increased from $10,000 to $40,000. Since charitable contributions are only tax-deductible if you itemize, this change makes charitable deductions more valuable for a larger number of taxpayers.

A new floor for charitable deductions. Starting in 2026, itemizers will only be able to deduct charitable gifts that exceed 0.5% of their adjusted gross income (AGI). For someone with $200,000 in AGI, that means only donations above $1,000 would be deductible.

A planning window through 2029. The period from 2025 through 2029 offers a time-sensitive opportunity to optimize the timing and structure of your charitable gifts before the new floor takes full effect.

Strategies for Different Situations

The right approach depends on your specific circumstances. Here are some strategies worth considering:

For Those Who Give Regularly: Consider "Bunching"

If you typically make charitable contributions each year, "bunching" multiple years of giving into a single tax year can help you exceed the new 0.5% AGI threshold and maximize your deduction. This approach became increasingly popular after the 2017 Tax Cuts and Jobs Act raised the standard deduction, and it's even more relevant now.

For Those With Appreciated Investments: Gift Securities, Not Cash

Donating highly appreciated securities, rather than selling them and giving cas, offers what I call a "triple benefit":

1. You avoid the capital gains tax you'd owe from selling the securities outright.

2. You remove the asset (and any future appreciation) from your gross estate.

3. You receive a deduction on your ordinary income.

This strategy is especially attractive during years with significant capital gains—such as when equity compensation vests, following a business sale, or when you don't have losses to offset gains.

For Retirees Age 70½ or Older: Qualified Charitable Distributions

If you have a traditional IRA and are 70½ or older, qualified charitable distributions (QCDs) allow you to transfer up to $108,000 (for tax year 2025) directly from your IRA to qualified charities. This can satisfy your required minimum distribution (RMD) while excluding the amount from your taxable income, regardless of whether you itemize.

For Those Seeking Flexibility: Donor-Advised Funds

Donor-advised funds (DAFs) have grown significantly in popularity, with assets now exceeding $250 billion. A DAF works like a charitable investment account: you make a contribution, receive an immediate tax deduction, and then recommend grants to charities over time. Meanwhile, the funds can be invested and grow tax-free while you decide on the timing and recipients of your gifts.

DAFs are particularly valuable for "bunching" strategies. You can make a larger contribution in a single year to exceed the 0.5% AGI floor, then distribute to your chosen charities over several years.

The Bigger Picture: Charitable Giving and Estate Planning

Charitable giving also plays an important role in estate planning. Assets left to charity are not subject to estate tax, making charitable bequests an efficient way to reduce estate tax liability while supporting causes that matter to you.

For those with larger estates, more sophisticated tools exist, including charitable remainder trusts, charitable lead trusts, and private foundations, each with their own benefits and considerations.

Perhaps most importantly, charitable giving can help you leave a durable legacy and reinforce family values across generations. For many families, philanthropy becomes a way to involve children and grandchildren in meaningful discussions about what matters most, conversations that can be among the most valuable aspects of comprehensive wealth planning.

The Bottom Line

With year-end approaching and new tax rules creating both opportunities and considerations, now is the time to think strategically about your charitable giving. The goal isn't to complicate something that should feel meaningful, it's to ensure that your generosity works as hard as possible for both the causes you support and your overall financial plan.

If you'd like to discuss how charitable giving fits into your broader financial strategy, we're here to help.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.