Tax-Efficient Charitable Giving Smart Charitable Giving: Donate Stock, QCDs, CRT & CLT Give more to charity and keep more in
Charitable Giving
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By ira
August 25, 2025
Tax-Efficient Charitable Giving
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Smart Charitable Giving: Donate Stock, QCDs, CRT & CLT
By ira
August 25, 2025
Smart Charitable Giving: Donate Stock, QCDs, CRT & CLT
Give more to charity and keep more in tax savings. This guide covers donating appreciated stock, QCDs, and advanced strategies like CRT and CLT, plus when to use a DAF and smart year-end tactics. Planning note: New charitable-deduction rules took effect in 2026. They change when bunching gifts pays off for itemizers, and they give non-itemizers a deduction for cash gifts.
At a glance: If you don’t itemize, you can now deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to qualifying charities; gifts to a donor-advised fund don’t count. If you itemize, only giving above 0.5% of your adjusted gross income is deductible, so bunching several years of gifts into one year can help. In the top (37%) bracket, each dollar of itemized deductions now saves at most 35 cents of federal income tax.
Why start with tax-efficient charitable giving?
Planned philanthropy lets you support causes you value while coordinating cash flow, investment strategy, and taxes. By choosing the right vehicle—donating appreciated stock, QCDs from IRAs, DAFs, or trusts like CRTs and CLTs—you often give more to charity at a lower after-tax cost. Timing matters more under the rules that took effect in 2026.
Watch Ira Koyner explain the full strategy in this video (recorded in September 2025, before the 2026 rules took effect; its advice to act in 2025 no longer applies):
Donating Appreciated Stock: High-Impact First Step
How to donate stock to charity—and why it’s powerful
- Avoid capital gains tax: Donate shares held > 1 year directly to a qualified charity or DAF.
- Deduct fair market value: Deduct FMV (subject to AGI limits), not cost basis.
- Rebalance efficiently: Trim concentrated or legacy positions with maximum charitable dollars.
Tip: Ask the nonprofit for brokerage DTC instructions, or contribute to a donor-advised fund (DAF) for easier processing and grant flexibility.
Donor-Advised Fund (DAF): Flexible Grant-Making
When a donor-advised fund DAF shines
- Bunching deductions: Since 2026, itemizers can deduct only the part of each year’s giving above 0.5% of adjusted gross income. Putting several years of gifts into a DAF in one year means you lose that first 0.5% once instead of every year, while you recommend grants over time.
- Invest the balance: Potential tax-free growth for future grants.
- Privacy & admin: One receipt for tax filing; option to grant anonymously.
Coordinate the DAF contribution size with your expected AGI and state rules to avoid leaving deduction on the table.
Numbers Example: Donate Stock vs. Sell Then Give Cash
Assumptions Market value $50,000; Cost basis $20,000; combined long-term capital gains tax = 31.8% (20% federal + 8% state + 3.8% NIIT). Deduction value assumes a marginal 32% federal + 8% state = 40% combined.
| Donate Shares | Sell, Then Donate Cash | |
|---|---|---|
| Market value of shares | $50,000 | $50,000 |
| Cost basis | $20,000 | $20,000 |
| Long-term gain | $30,000 | $30,000 |
| Capital gains tax (31.8%) | $0 | $9,540 |
| Amount charity receives | $50,000 | $40,460 |
| Potential charitable deduction | $50,000 | $40,460 |
| Value of deduction (40%) | $20,000 | $16,184 |
Visual: Bigger Gift & Bigger Tax Benefit When Donating Stock Directly
✅ By donating stock directly:
• The charity receives $9,540 more.
• Your tax savings are $3,816 higher.
• Together, this increases your generosity by $13,356.
Assumes long-term holding (>1 year). Capital gains tax = 20% federal + 8% state + 3.8% NIIT = 31.8%. Deduction value at 32% federal + 8% state = 40%. From 2026, itemizers deduct only giving above 0.5% of AGI, which trims the deduction in both columns; donating shares still comes out ahead. Actual results depend on your situation.
Qualified Charitable Distributions (QCDs)
Qualified Charitable Distribution (QCD) essentials
- Who: IRA owners age 70½ or older.
- What: Send IRA dollars directly to charity (annual limit per IRS rules).
- Why: Counts toward RMDs but excluded from taxable income—helpful for IRMAA and deduction limits.
- Note: QCDs can’t go to DAFs, supporting organizations, most private foundations, or most split-interest gifts.
2026 change impact: QCDs are not affected by the 2026 charitable-deduction rule changes described on this page. Their exclusion-from-income treatment still applies when done correctly.
Year-End Giving Strategies
Simple year-end giving strategies that boost results
- Start transfers early: Ensure stock gifts settle pre-Dec 31.
- Bunching + DAF: For itemizers, putting several years of gifts into a DAF in one year means the 0.5%-of-AGI floor applies once instead of every year.
- Non-itemizers: Since 2026, you can deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to qualifying charities on top of the standard deduction. Gifts to donor-advised funds, supporting organizations and most private foundations don’t qualify.
- Rebalance: Use gifts to trim concentrated positions with low tax friction.
Advanced Planning: Charitable Remainder Trust (CRT) & Charitable Lead Trust (CLT)
How a charitable remainder trust CRT works
- Income now, charity later: CRT pays you/beneficiaries for life or term; remainder to charity.
- Tax benefits: Upfront deduction; appreciated assets can be sold inside the trust without immediate capital gains tax—recognized over time via the four-tier rules.
- Best for: Highly appreciated assets + desire for lifetime income and philanthropy.
How a charitable lead trust CLT works
- Charity now, heirs later: CLT pays charity first; remainder to heirs.
- Transfer strategy: Shift future appreciation with potential gift/estate tax efficiencies.
- Grantor vs non-grantor: Grantor CLT gets upfront deduction but reports trust income; non-grantor CLT gets deductions at trust level (no upfront personal deduction).
CRT vs. CLT at a glance
| Feature | CRT | CLT |
|---|---|---|
| Who receives income first? | Donor/beneficiaries | Charity |
| Primary goal | Income + philanthropy | Philanthropy + wealth transfer |
| Typical tax benefit | Upfront deduction; gain deferral within trust | Gift/estate leverage; possible upfront deduction (grantor CLT) |
| Best for | Appreciated assets; retirement income | High-net-worth estate planning |
Ready to Design Your Tax-Efficient Charitable Giving Plan?
We’ll quantify the benefits of donating appreciated stock, QCDs, DAFs, and trust options like CRT and CLT based on your accounts and tax bracket—with special attention to timing under the 2026 rules.
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