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Exploring Charitable Giving Options – May 2024

By May 15, 2024No Comments5 min read

Individuals who are charitably inclined are primarily motivated to do so because of causes near and dear to their heart. Being tax-smart allows donors to maximize the impact of those gifts. Deciding on the best strategy for donating your hard-earned dollars takes planning. A charitable giving strategy will consider not only when, how and what you give, but in doing so, how to maximize the impact of those dollars while minimizing your taxes.


With the increase in the standard deduction in 2017 came a new discussion topic relative to charitable giving and the “bunching” of contributions into calendar years. The 2024 standard deductions are $29,200 for married filing jointly filers and $14,600 for single filers. For people over age 65, there is an additional amount you can deduct of $1,550 if single and $3,100 if married and both are over age 65. Because many households no longer itemize deductions given the higher standard deduction, “bunching” or pre-funding several years of charitable giving into one calendar year to exceed the standard deduction has become a good tax planning strategy. In the “off-years” of charitable giving, taxpayers revert to the standard deduction. Cash donations to public charities are deductible up to 60% of your taxable adjusted gross income (AGI) annually, as compared to 30% of AGI when donating stock or other appreciated assets.

Of note is that the IRS classifies Section 501(c)(3) organizations as a private foundation or a public charity. The deductibility of contributions to a private foundation is more limited than for a public charity. Public charities are frequently religious groups and research organizations affiliated with medical causes, hospitals, schools and colleges and will have an active program of fundraising from many sources. Private foundations typically have a single major source of funding and primarily make grants to other charitable organizations or individuals rather than having direct operations.


We suggest you think beyond your cash assets for charitable donations and consider long-term appreciated assets with low tax basis. If you use long-term holdings of assets that are significantly appreciated in value as gifts to a charity, you bypass having to report the capital gains that are embedded in those assets and get an itemized tax deduction for the full fair-market value of the donated asset.

Low-basis, long-term assets can include stocks, real estate, art and collectibles.  The market value of publicly traded stocks, mutual funds and other securities is readily determined. Donations of personal or real property will generally require the donor to obtain a qualified appraisal as further detailed at length in IRS Publication 561. Assets held less than one year are not eligible for charitable donation without triggering a reportable capital gain.

Do you have assets with unknown tax basis?  This can happen for many reasons, including assets that you may have inherited many years ago. You will need to make an attempt to document a cost basis assumption to the best of your ability for tax reporting purposes.


Donor-advised funds (DAFs) are a separate, dedicated account used by some individuals and families for their charitable giving options. There are several options for setting up DAF accounts, including a cost-effective offering by Charles Schwab. A DAF is typically funded with low tax cost, long-term asset holdings which are then sold for cash within the DAF to fund charitable gifts by the donor. The gift to the donor-advised fund qualifies for the full fair-market value deduction of the donated asset, and avoids the capital gains taxes as well. As noted earlier, up to 30% of your taxable adjusted gross income annually is the limit for these deductions. This can also be a great strategy for taxpayers who are thinking about retirement, but still in high income earning years. The funder can front-load their donor-advised fund, essentially pre-funding charitable giving during retirement years when income may be significantly lower. Some clients routinely ask us to consider moving long held, low cost basis stocks from their managed accounts to their DAF to help mitigate realized gains.

DAFs have become increasingly popular over the use of private foundations because DAFs do not have the annual reporting and excise tax issues that go with private foundations. Private foundations also have a 20% of adjusted gross income limit for the gifting of long-term securities and 30% of adjusted gross income for cash donations.

If you make charitable contributions with both cash and stock or other appreciated assets, the IRS has an ordering rule in place that will determine which deductions are taken first and to what extent. If you are unable to use all your contributions because of AGI limits, you can carry forward the unused charitable deductions for up to five years.


If the taxpayer is over age 70.5, Qualified Charitable Distributions (QCDs) from Individual Retirement Accounts (IRAs) are a great way to make charitable contributions with pre-tax dollars. The gift amount will not qualify as an itemized charitable deduction, but it will not be considered taxable income either. Reducing your taxable income may have other benefits, such as reducing your Medicare premiums. Each taxpayer can donate up to $105,000 per calendar year directly from their own IRA. 2024 is the first year that inflation indexing has been applied to the long-running $100,000 old limit.

A QCD gift must go directly to a public 501(c)(3) charity. A Donor-Advised Fund does not qualify as an eligible charity for QCD purposes, nor does a private foundation. As a positive, the QCD also counts towards your annual RMD if you are age 73 or older, reducing your taxable income.

Donors can also make a one-time tax-free QCD of up to $53,000 from their IRA for a charitable gift annuity. The $53,000 maximum life-time gift will count towards your annual $105,000 QCD limit and towards your RMD. The charitable gift annuity donor receives a taxable annual income stream for life from the contract, with the remainder of the gift going to the charitable institution at the donor’s death.

There is no single best strategy for charitable giving. Choosing between cash, appreciated assets or QCDs will depend on your personal situation, including your age, income, your portfolio and your charitable goals. Because of the many options available, we like to encourage you to consider your giving plan options before the busy scramble at the end of the calendar year.  If this topic is of further interest to you, your Meritage team will be happy to discuss and explore these charitable giving options.