When most people think about charitable giving, they think about writing a check. While there’s nothing wrong with giving cash, there are often better ways to make sure more of that money goes to the charitable causes you care about and less (legally) to the IRS.
Whether you’re retired and taking required minimum distributions, or in your highest-earning years and facing steep marginal tax rates, there are tools available that can make your giving go further—both for you and for the organizations you care about.
Let’s look at three of the most overlooked options.
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For Retirees: The Qualified Charitable Distribution (QCD)
If you're in your 70s and taking required minimum distributions (RMDs) from retirement accounts, you have a unique planning opportunity: the Qualified Charitable Distribution (QCD).
Here’s how it works:
- You can direct up to $100,000 per year from your IRA straight to a qualified charity.
- The amount counts toward your RMD but does not count as taxable income.
- That means you’re reducing your taxable income while still meeting the IRS requirement by supporting a cause you care about.
This strategy can be especially powerful for retirees who don't itemize deductions or who want to limit the impact of RMDs on their Medicare premiums or tax brackets.
For Peak Earners: The Donor-Advised Fund (DAF)
If you're in your peak earning years—facing the 35% or 37% tax bracket—giving cash outright is rarely your most efficient option. That’s where a donor-advised fund (DAF) comes in.
With a DAF, you can:
- Bunch multiple years of charitable contributions into a single high-income year to maximize your deduction.
- Donate appreciated assets like stock, real estate, or even a partial interest in a closely held business or farm—avoiding capital gains and receiving a deduction for the full fair market value.
- Distribute funds over time to charities at your discretion, rather than rushing decisions at year-end.
One of our clients donated their 50% share of a family farm into a DAF before the property went to auction. That one decision avoided capital gains tax on the sale, secured a large charitable deduction, and created a multi-year charitable planning opportunity. We're still using that deduction years later to offset the tax cost of converting IRA money to Roth IRA.
That’s the kind of flexibility a DAF can offer.
Charitable Remainder Trusts
One additional tool worth mentioning is the Charitable Remainder Trust (CRT). CRTs are useful for business owners, real estate investors, or anyone selling a highly appreciated asset. How it works at a glance:
- You contribute the asset to a trust before the sale.
- The trust sells it, avoiding immediate capital gains.
- You receive income from the trust over time.
- The remainder goes to charity when the trust ends.
In specific cases, we’ve seen this strategy combine powerful tax deferral, a partial deduction today, and a long-term charitable legacy, all while keeping the plan design relatively simple.
Timing Matters
Despite the headache of reading our industry’s many acronyms, these tools are immensely popular because of their positive impact on financial plans, both for increasing charitable impact and reducing tax drag. We also love that they can be used strategically as tax brackets shift, income spikes, or RMDs kick in.
At the end of the day, it all starts with generosity as a core value in your family. If you want to be more generous and more strategic with your wealth, we are here to bring those useful, acronym-stricken tools to the table to help you accomplish your vision.
In giving and in life, let’s Envizion More. Reach out to our team if you have any questions on your tax-efficient charitable giving strategy.