Tax‑Efficient Giving Strategies to Support Your Favorite Charities

Giving is an important part of many people’s faith and financial life. For most, generosity means writing a check or giving cash on a regular basis, but what many people don’t realize is that cash may not always be the most impactful or tax‑efficient way to give.

Why Think Beyond Cash?

According to the National Christian Foundation, statistics show that about 75% of charitable giving comes from cash, while only 25% comes from non-cash assets.

Yet when we look at how wealth is actually held, especially for high-net-worth families, the picture flips:

• Approximately 90% of assets are non-cash (stocks, retirement accounts, etc.)
• Only ~10% is held in cash

That means many people are giving from the least available part of their financial picture.

Non-cash assets can include:

• Appreciated stocks or mutual funds
• Company stock (ESPP, RSUs, PSUs)
• Inherited investments with large capital gains
• Retirement assets like IRAs or 401(k)s

When used strategically, these assets can significantly increase both your giving and your tax efficiency.

Let’s explore six smart ways to give that can potentially increase your impact while also being wise with the resources you’ve been given. Not every strategy will be right for everyone, but knowing your options allows you to make intentional, informed decisions.

1. Donor-Advised Funds (DAFs)

A Donor-Advised Fund is a fund created specifically for charitable giving. You open a DAF through a charitable custodian such as National Christian Foundation, contribute assets through an irrevocable gift, receive a tax deduction, and then recommend grants to charities over time.

Why consider a DAF?

• Timing flexibility: Take the deduction now, grant funds to charities later
• Simplified taxes: One receipt for all contributions
• Anonymous giving (if desired)
• Automated or recurring giving
• Potential growth: Funds may be invested and grow tax-free

The Real Advantage: Giving Appreciated Assets

DAFs shine when you contribute long-term appreciated investments.

Let’s walk through the following example:

• You own stock now worth $20,000 that you originally bought for $1,250
• Selling it would trigger capital gains tax on $18,750
• Instead, donating it provides the following advantages:
  • Avoids the capital gains tax
  • Provides a full fair market value deduction

This simple shift can mean thousands of dollars saved and more given to charity.

2. Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older, you can give directly from your IRA using a Qualified Charitable Distribution (QCD).

Benefits:

• Up to $111,000 (2026 limit) per person per year can be granted to a qualified charity
• This donation counts toward your Required Minimum Distribution (RMD)
• No income taxes owed on the distribution

Why this matters

Money in your IRA has never been taxed. If you withdraw it, you’ll owe income tax. But if you send it directly to a charity, you avoid taxation entirely.

This is often more efficient than giving cash from your bank account.

3. Legacy IRA (SECURE 2.0 Act)

This is a newer strategy that allows you to make a one-time transfer (up to $55,000) from your IRA to fund a charitable gift that also provides income.

How it works:

• Transfer IRA funds to a qualified charitable arrangement
• Receive fixed income payments for life
• Counts toward your RMD
• Donations are tax-free (though payments are taxable)

This approach combines giving, income, and legacy planning in one move.

4. Charitable Gift Annuities (CGA) using non-retirement assets

With a Charitable Gift Annuity, you give assets (cash or appreciated property) directly to a charity in exchange for fixed lifetime payments.

Benefits:

• Immediate charitable tax deduction
• Stable, predictable income stream
• Potential capital gains tax savings
• A portion of income may be tax-free

These are especially appealing for individuals age 60+ who want both income and impact.

5. Charitable Remainder Trusts (CRTs)

For larger gifts (typically $250K+), a Charitable Remainder Trust provides flexibility and long-term planning benefits. This type of gift though requires working with an attorney and a CPA as well as a Philanthropic Administration group to administer the trust.

Key features:

• Income for life or a defined period
• Potential tax advantages by avoiding capital gains
• Ability to contribute complex or large assets
• Reduces taxable estate

There are two main types:

• CRAT (Annuity Trust) – fixed payments
• CRUT (Unitrust) – payments fluctuate with investment value

CRTs are more complex but offer powerful planning opportunities.

6. Testamentary Giving (Giving After You’re Gone)

Another impactful way to give is through your estate.

Options include:

• Naming charities as beneficiaries of accounts
• Directing assets into a Donor-Advised Fund
• Including charities in your will or trust

Some people even think of this as adding a “child named Charity” into their estate plan.

A Note on Taxes and Intent

While many of these strategies offer tax advantages, the goal isn’t to give just for tax benefits. Rather, it’s about maximizing your generosity while being a wise steward. If you can give more to the causes you care about while being as tax efficient as possible, that’s a win-win.

Final Thoughts

There are more ways to give than simply writing a check.

By understanding your full financial picture, you can:

• Give more effectively
• Reduce unnecessary taxes
• Align your generosity with your long-term goals

If you’d like to explore how these strategies could apply to your situation, we invite you to schedule a meeting with a Sound Stewardship advisor to determine the best approach for individual situation.

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