Strategies for year-end giving

By Doug Babcock, CFP

Principal | Advisor | Professional Financial Management

Every year, generous people across our community step up to support the nonprofits that care for our neighbors, strengthen families, and keep essential services running. Year-end gift planning constitutes a major portion of this support and, in turn, requires one not only to give thoughtfully, but also tax efficiently.

UNDERSTANDING CHARITABLE GIVING AND TAXES

The One Big Beautiful Bill Act (OBBBA) passed earlier this year is set to shift the charitable giving landscape in the coming years, with the most notable changes as follows:

• Permanent extension of the higher standard deduction with continued increases in future years.
• Rules will change for those who itemize. Beginning in 2026, you will only be able to itemize charitable deductions on contribution amounts that exceed 0.5% of your adjusted gross income.
  Top earners will see the deduction value of their gifting capped at 35% instead of the full marginal rate of 37% in 2026.
• Combined, these changes create a more complex, charitable giving environment. In some cases, smaller gifts may not offer the same tax impact next year as they have in prior years (including this year). This said, it may make sense to increase your giving this year to take advantage of the current rules. This can be done by consolidating, or “bunching” a few or several years’ worth of gifts into a single large gift this year.

While you can do this for single or multiple charities, another strategic way to do accomplish this is through the use of a donor-advised fund (DAF). Contributing to a DAF before 12-31 (some have deadlines much sooner so if you may need to move fast!), you receive an immediate tax deduction while creating the flexibility to recommend grants over time.

GIVING APPRECIATED STOCK

Another tax-smart strategy, especially in a strong market, is donating appreciated securities. By giving stock held for more than one year directly to a charity or into a DAF, you avoid paying capital gains tax on the appreciation while still receiving a charitable deduction for the fair market value of the stock. This approach can make your gift go further without increasing your out-of-pocket cost and pairs especially well with year-end planning or “bunching” strategies.

BENEFITS OF QCD’S

If you’re 70½ or older, a Qualified Charitable Distribution (QCD) from your IRA is one of the most effective tools available. For 2025, the QCD limit has increased to $108,000, and giving directly from your IRA results in these dollars being excluded from taxable income.

If you are taking required minimum distributions (RMD’s) and have charitable intent, a good strategy is to give part, or all, of this dollar amount away (part of the $108,000 annual total) in lieu of giving it out of other monetary sources. Doing so eliminates paying tax on the dollars given directly to the charity, accomplishing your goal of giving but doing so in a tax efficient manner.

In summary, our hope is that you give with purpose, plan with clarity, and make this year’s generosity work smarter—for both you and the causes you care about.

Doug Babcock, CFP

Principal | Advisor | Professional Financial Management

*This material is for informational purposes only and is not intended as tax, legal, or investment advice. Individuals should consult their tax or financial professional regarding their specific situation.