3 Charitable Holiday Giving Strategies for Maximum Tax Benefits in 2025
Written by
Josephine Nesbit
Edited by
Cory Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
By making charitable contributions before the end of the year, you could potentially reduce your taxable income while also making a difference. But before you start giving, it’s important to understand what qualifies and sort through your charitable giving options.
Here are some charitable holiday-giving strategies for maximum tax benefits in 2025.
What Is a Charitable Contribution?
“There are lots of ways to support important causes or people in your community and around the world. If you want to ensure that gift is tax-deductible, you need to make sure the benefitting organization is eligible for a tax-deductible donation and can provide a tax receipt,” said Mitch Stein, head of strategy for Chariot, a donor-advised fund payments company.
According to Stein, this means your gift is going to a 501(c)(3) nonprofit in good standing with the IRS. You can make cash and/or noncash contributions before the end of the tax year to be deductible. Per IRS guidelines, the limit on charitable cash contributions is 60% of your adjusted gross income (AGI) for 2024, while noncash contributions are capped at 20% to 50% of your AGI.
Stein recommends not waiting until the end of the month to make a charitable contribution. “If you’re interested in making an impact with giving, the worst thing you can do is put off taking action as it’s easy to keep delaying and missions all over our country need help now.”
But before you give, consult an expert. “People should consult with their tax, accounting or financial advisors before making any decisions with their investments,” Stein added.
Donate Appreciated Assets
According to Stein, one way to donate is to identify appreciated assets in your portfolio that you’ve held for more than a year, such as low-basis securities or cryptocurrency holdings, and donate them directly to a nonprofit that qualifies for tax-deductible support.
“You avoid capital gains that would’ve been owed if the assets had been sold first and the gift can be deducted from your taxable income if you’re itemizing deductions,” he added.
Donor Advised Fund Account (DAF)
An even more effective strategy is to contribute appreciated assets to a Donar Advised Fund account (DAF). “A DAF is like a tax-advantaged investment account for charitable giving — similar to a 401(k) for retirement or HSA for healthcare expenses,” Stein stated.
DAF accounts have the same tax benefits as donating appreciated assets, plus an amount left in the DAF is invested in the market and continues to grow tax-free, says Stein. You can also support multiple organizations and make gifts to nonprofits whenever you like.
“DAFs are more accessible than you might think, with most financial brokerage firms [like] Fidelity, Schwab, Vanguard, etcetera, most community foundations and tech-forward startups [like] Daffy, [and] CharityVest offering them,” he explained.
Qualified Charitable Distributions (QCDs)
While DAFs are one of the best options for those under the age of 70 ½, there’s another option that benefits older taxpayers.
“Once people reach age 70 and 6 months, they become eligible to make qualified charitable distributions (QCDs) from their retirement accounts,” explained Michelle Kruger, senior financial planner at Gratus Capital.
For 2024, individual retirement arrangement (IRA) owners aged 70 ½ and older can make up to $105,000 in tax-free charitable donations through qualified charitable distributions — up from $100,000 in past years, according to the IRS.
QCDs also satisfy required minimum distribution (RMD) requirements and are taxed at ordinary income tax rates. According to Kruger, by using them for charitable giving purposes, you can reduce or eliminate your RMDs.
“You can start making QCDs before RMD age which can help to reduce your retirement account balance and your subsequent required minimum distributions,” Kruger added. “This strategy may be a good option for people who have large pre-tax retirement accounts and significant charitable giving goals.”
More From GOBankingRates
