Day 11 : A Guide to Charitable Giving Before Year-End for Tax Benefits

As we move deeper into Q4, many taxpayers begin thinking about charitable giving—both for the satisfaction of supporting worthy causes and for the potential tax benefits. Let's explore how to maximize both your impact and your tax savings.

Understanding Charitable Deduction Basics

Itemizing vs. Standard Deduction For 2025, the standard deduction is:

• Single filers: $14,600

• Married filing jointly: $29,200

• Head of household: $21,900

You can only deduct charitable contributions if you itemize deductions and your total itemized deductions exceed the standard deduction.

Qualified Organizations Not all donations are tax-deductible. Contributions must go to:

• IRS-recognized 501(c)(3) organizations

• Churches and religious organizations

• Government entities for public purposes

• Certain nonprofit schools and hospitals

Always verify an organization's status at irs.gov before donating.

Types of Charitable Contributions

Cash Donations

• Generally deductible up to 60% of adjusted gross income (AGI)

• Excess can be carried forward for five years

• Must have written acknowledgment for donations over $250

• Bank records required for all cash donations

Property Donations

• Non-cash donations over $500 require Form 8283

• Fair market value determines deduction amount

• Special rules apply to vehicles, clothing, and household items

• Appraisals required for property valued over $5,000

Advanced Charitable Giving Strategies

Bunching Donations Instead of giving $5,000 annually, consider:

• Giving $10,000 every other year to exceed standard deduction threshold

• Using donor-advised funds to smooth out actual charitable distributions

• Timing large donations strategically based on income fluctuations

Donor-Advised Funds

• Contribute appreciated securities to avoid capital gains tax

• Receive immediate tax deduction

• Recommend grants to charities over time

• Investment growth potential for future giving

Qualified Charitable Distributions (QCDs) For those 70½ and older:

• Direct transfer from IRA to qualified charity

• Counts toward required minimum distribution

• Excludes distribution from taxable income

• More tax-efficient than taking distribution and donating cash

Appreciated Property Strategies

Stock Donations Benefits of donating appreciated stock:

• Avoid capital gains tax on appreciation

• Deduct full fair market value

• Charity receives full value without tax consequence

• Keep cash for other needs

Real Estate Donations

• Can provide significant tax benefits

• Complex rules require professional guidance

• Consider partial interest donations

• Environmental restrictions may apply

Year-End Planning Considerations

Timing Matters

• Donations must be made by December 31st

• Mailed checks must be postmarked by year-end

• Credit card charges count when processed, not when paid

• Online donations must be completed by December 31st

Documentation Requirements

• Written acknowledgment for donations over $250

• Contemporaneous written records for all donations

• Special forms for non-cash donations

• Professional appraisals for significant property gifts

Income Planning Integration Consider charitable giving alongside:

• Roth IRA conversions

• Capital gains realization

• Business income timing

• Other itemized deductions

Common Mistakes to Avoid

Inadequate Documentation

• Keep detailed records of all donations

• Obtain proper acknowledgments

• Don't rely solely on canceled checks

• Document non-cash donations thoroughly

Overvaluing Non-Cash Donations

• Use realistic fair market values

• Obtain professional appraisals when required

• Understand "thrift store value" vs. original cost

• Be conservative in valuations

Missing Deadlines

• December 31st deadline is firm

• Don't wait until the last minute

• Consider processing times for complex gifts

• Plan ahead for maximum benefit

Business Charitable Giving

Corporate Donations

• Deductible up to 10% of taxable income

• Excess carries forward five years

• Must benefit the business's trade or industry

• Different rules for C-corps vs. pass-through entities

Sponsorship vs. Charitable Giving

• Sponsorships may be business expenses rather than charitable deductions

• Consider marketing value received

• Document business purpose for sponsorships

• Separate charitable intent from business promotion

Estate and Gift Tax Considerations

Charitable Remainder Trusts

• Provide income stream during lifetime

• Remainder goes to charity at death

• Tax deduction based on remainder value

• Complex but potentially very beneficial

Charitable Lead Trusts

• Charity receives income stream

• Remainder passes to heirs at reduced gift/estate tax cost

• Useful for appreciating assets

• Professional guidance essential

Planning for 2026 and Beyond

Multi-Year Strategies

• Consider impact of changing tax rates

• Plan giving levels to optimize deductions

• Use carry-forward provisions strategically

• Coordinate with retirement planning

Family Involvement

• Teach children about charitable giving

• Consider family foundations for larger estates

• Involve next generation in giving decisions

• Create lasting philanthropic legacy

Working with Professionals

Complex charitable giving strategies benefit from:

• Tax professional guidance

• Estate planning attorney input

• Financial advisor coordination

• Charity staff consultation

Remember, while tax benefits are valuable, charitable giving should align with your values and financial capacity. The tax savings are a bonus to the satisfaction of supporting causes you care about.