By The Galecki Financial Management Team
The holidays are a great time for charitable giving. Many people want to give back during this special time, but many also overlook important, tax-efficient giving strategies.
When you understand tax-smart charitable giving, your donation can have long-lasting benefits for you and your intended recipient.
Why Does Year-End Charitable Giving Matter?
Charitable giving often helps our clients fulfill deeply personal financial goals while simultaneously making a difference in the community.
Planning your charitable giving strategy is especially important at the end of the year. Tax deadlines are approaching quickly, and you must make any planned donations by December 31.
Tax Benefits of Charitable Giving
Charitable donations are generally tax-deductible, with deductions limited to 50% of your Adjusted Gross Income (AGI). In some situations, the deduction cap may be lower.
If you’re interested in charitable giving this year, we can help you create a strategy. However, these three methods are fairly popular among our clients:
Cash Donations
Cash donations are relatively straightforward, but they aren’t always the most tax-efficient way to give.
Appreciated Assets
If you want to maximize your tax deduction while also maximizing what the charity receives, consider donating appreciated stocks or other assets. This strategy has a couple of key benefits:
- Your donation won’t trigger capital gains tax.
- You can deduct the full appreciated amount from your taxes.
- The charity receives the appreciated amount.
Donating appreciated assets also tends to be more efficient. The charity receives more money (and you receive a greater tax deduction) than if you sold the investment, paid capital gains taxes, and then donated the proceeds.
IRA Charitable Distributions
If you must take Required Minimum Distributions (RMDs) from your retirement account, you may avoid income tax with a Qualified Charitable Distribution (QCD). This is when you transfer money directly from a traditional IRA to a qualified charity. The maximum QCD is $108,000 per taxpayer in 2025; however, any level of donation makes sense utilizing this strategy.
Charitable Giving Strategies to Consider Before Year-End
If you’re thinking about charitable giving, consider these additional strategies:
Donor-Advised Funds (DAFs)
With a DAF, you fund a charitable giving account and benefit from an immediate tax deduction. You may then direct donations to different charities over time.
Creating a DAF can be a great way to establish a family tradition of giving. You may name children or other loved ones as successors in your estate plan, and they can continue to recommend charitable grants.
Bunching
Are you just beneath the standard deduction threshold? If so, “bunching” your charitable donations (making multiple years’ worth of donations in one tax year) may help you exceed the threshold and save you money. You can bunch donations to a specific charity or create a Donor-Advised Fund as mentioned above.
Common Mistakes to Avoid in Charitable Giving
Before you give, verify that you aren’t making any of these common mistakes:
Missing Deadlines
If you want to deduct charitable contributions on your 2025 taxes, they must be made by December 31, 2025.
Misunderstanding Deductions
When you donate cash, you may deduct the full amount of the donation. When you give property or other assets, you can usually deduct the fair market value at the time of the gift.
IRS substantiation requirements mean that you must obtain written acknowledgment of your donation from the charity. Without documentation, you may not be allowed to deduct the donation.
Forgetting Long-Term Impact
Immediate tax savings matter, but remember to look at the big picture of your giving.
Let Us Help Build Your Charitable Giving Plan
At Galecki Financial Management, we aim to guide you through your financial life, no matter where you are right now. Our Fee-Only advisors in Fort Wayne, Indiana, focus on removing as much worry as possible from your finances.
We believe charitable giving is a noble goal, and we strive to help you reap as many tax advantages as possible. If charitable giving is part of your financial plan for this year, get in touch with us to schedule a review as soon as you can.
If you want to learn more or you’re considering working with our Fee-Only advisors, contact us online today. To schedule a meeting, call (260) 436-8525 or email [email protected].
About Galecki Financial Management
At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re Fee-Only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.