Tax-smart charitable giving strategies for year-end 2025

How can investors donate more tax-efficiently?

• The passage of the One Big Beautiful Bill (OBBB) significantly increases the tax complexities of charitable giving decisions, and optimal donation strategies will vary considerably.
• Year-end 2025 presents an opportune time for financial advisors to connect with clients to assess the impact of the OBBB on their philanthropic goals and tailor charitable giving strategies to the client’s unique tax profile, goals, and circumstances.
• Frequent legislative changes and greater tax complexity mean there will continue to be considerable utility in proactive tax planning and increased need for financial advisors who can capably navigate the intersection of income taxes, charitable giving, estate planning, and investing.

At year-end, many investors find themselves looking for ways to reduce their tax liability while also supporting causes that are important to them. Fortunately, the two objectives are not mutually exclusive—it’s possible to support our communities while reducing the donor’s overall tax burden.

Fine tuning charitable giving strategies for tax efficiency may reduce the cost of giving and allow investors to be even more generous and effective with their resources or achieve other financial goals. Year-end planning presents an excellent opportunity for financial advisors to connect with clients and provide personalized guidance around charitable planning decisions.

Optimal donation strategies after passage of the One Big Beautiful Bill (OBBB) will vary considerably based on the tax profile and circumstances of the individual investor.

Charitable planning post-OBBB

The passage of the OBBB significantly increases the tax complexities of charitable giving decisions. Some of the OBBB changes that influence charitable strategies for individual investors include the following:

Favorable charitable giving strategies may vary depending on many factors and nuances, including the following:

In coordination with an investor’s tax advisor, effective charitable planning will require a holistic look at a client’s tax profile, goals, and circumstances.

Although a detailed analysis of every possible situation is beyond the scope of this article, listed below are some potential planning strategies for common scenarios. The diversity of solutions underscores the need for custom advice.

Bunching deductions

A bunching deductions strategy frequently entails consolidating multiple years of charitable donations into a single year, itemizing deductions that year, and then claiming the standard deduction in other years. Such a strategy may boost overall deductions and tax savings over a multi-year period.

When bunching deductions, donating to a DAF may be an attractive option. Investors receive an upfront charitable deduction and have the flexibility to spread charitable grants over multiple years. However, advisors should pay careful attention to the charitable recipient, as some strategies may preclude donations to certain types of charitable entities, such as DAFs or non-operating private foundations.

In future years, making larger but less frequent contributions that clear the new 0.5% AGI floor may be more advantageous than making smaller annual donations that don’t exceed this floor.

Qualified charitable distributions

For those aged 70.5 or older, a QCD allows taxpayers to make tax-free donations (up to $108,000 in 2025) directly from a tax-deferred IRA to a qualified charity. For married couples, each spouse can contribute up to this amount. QCD amounts may also count toward any required minimum distributions. QCDs may not be made to a DAF or private foundation.

Donors who make QCDs don’t receive an itemized charitable deduction, but the IRA withdrawal is not included in AGI, which may help to reduce or eliminate the phaseout of the SALT deduction in some situations.

QCDs are not affected by the limitations on itemized deductions, the 0.5% charitable floor, or the charitable deduction AGI limitations. Donors receive a tax benefit even if they don’t itemize their deductions.

Donating appreciated securities

Advisors should also be attentive to the type of asset being donated. While in many situations donating highly appreciated securities (e.g., mutual funds, exchange-traded funds, etc) is more tax efficient than donating cash, only cash donations may qualify for certain tax benefits. Such tradeoffs should be carefully weighed when an investor has the flexibility to donate either cash or appreciated securities.

Contributing long-term appreciated securities may allow donors to support charitable causes while realizing two important income tax benefits: the donor may receive a fair market value charitable deduction and avoid capital gain taxation on the unrealized appreciation.¹

Although in the case of the $1k/$2k above-the-line charitable deduction the OBBB incentivizes delaying cash contributions until 2026, such incentives don’t appear to be relevant for donations of appreciated securities.

From an administrative standpoint, marketable securities may be simple to value, easy to transfer, and widely accepted by nonprofits. Some charities may be unable or unwilling to accept donations of more complex or illiquid assets.

Donating stock from a loss-harvesting account

Active tax management that involves systematic tax-loss harvesting and minimizing capital gains can lead to situations where a portfolio has very highly appreciated tax lots. Such a process makes a loss-harvesting account a compelling source for selecting appreciated securities to donate to charity.

Cash that would have otherwise been donated to charity can be used to replenish the equity account, providing an extra benefit of increasing the cost basis of the overall portfolio which may facilitate additional future loss-harvesting opportunities. This infusion of cash can be especially beneficial for highly appreciated accounts offering fewer tax loss-harvesting opportunities at this point in their life cycles.

Donating appreciated stock and replenishing with cash may have other benefits as well. For example, oftentimes, the most highly appreciated securities represent overweight positions, so fresh cash may help to reduce overall risk that is measured as portfolio tracking error. Such a strategy may also enable clients to tax-efficiently eliminate positions that don’t align with their values or go against a desired factor tilt.

Potential income tax benefits of charitable donations

Conclusion

Taxes were complicated before the passage of the OBBB. They are even more complex and challenging post-OBBB. However, planning opportunities abound. Perhaps nowhere is this more evident than when trying to sort through the maze of charitable giving considerations to maximize charitable impact and after-tax outcomes.

Year-end is an opportune time for financial advisors to connect with clients to assess the impact of the OBBB on their philanthropic goals and tailor charitable giving strategies to the client’s unique tax profile, goals, and circumstances.

Frequent legislative changes and greater tax complexity mean there will continue to be considerable utility in proactive tax planning and increased need for financial advisors who can capably navigate the intersection of income taxes, charitable giving, estate planning, and investing.