Making the Most of your Giving

When onboarding a new client, I always ask them about some of their first memories of money. It’s a quick way to learn about their background, values, and the context behind their current financial circumstances. And let me tell you—the responses are fascinating.

The other day, I was reflecting on my own first money memories, and I was hit with a wave of nostalgia:

The Giving Bank

(I hope this random eBay seller doesn’t come after me for pirating their image)

As a kid, my parents gave me a cash allowance, maybe $20 a month. I would put 10% in the bank and give another 10% to the church. The rest was mine to spend on baseball cards, Nerf guns, and whatever else I was into at the time.

This taught me many lessons: how to pay myself first, the value of delayed gratification, and, most importantly, the importance of giving.

Today, when I talk to clients about their goals and values, one of the most common responses is an interest in giving—often to their church or an organization that has had a meaningful impact on them. While the intention is always admirable, the execution can sometimes be less than ideal.

Let me be clear: there is no wrong way to give. Every dollar you send to a good cause, whether by wire transfer or carrier pigeon, will be appreciated. However, to maximize your impact and avoid unnecessary financial strain, it’s worth ensuring your giving is both efficient and aligned with your financial goals.

Below are some of the most common mistakes and missed opportunities we see with charitably inclined clients.

Ignoring Qualified Charitable Distributions (QCDs)

If you’re fortunate enough to have a large Traditional IRA or 401(k) and you’re over the age of 70½, Qualified Charitable Distributions (QCDs) can be an excellent tool for achieving your giving goals. While most distributions from tax-deferred accounts are fully taxable, those sent directly to a qualified charity are excluded from your gross income. This means you can support a cause you’re passionate about while receiving a tax break—even if you don’t itemize deductions.

Additionally, depending on your age, QCDs count toward your Required Minimum Distribution (RMD), potentially lowering your taxable income.

Notes:

• Excludable amounts are limited to $100,000 annually per individual ($200,000 for married couples).
• You must receive written acknowledgement from the charity before filing your tax return.

Donating Cash Instead of Appreciated Assets

Writing a check to a charity is straightforward, and sometimes it’s the best option. But for those holding appreciated assets, like stocks or mutual funds, there’s often a more tax-efficient way to give.
Gifting appreciated stock allows you to:

1. Avoid capital gains tax
2. Claim a deduction for the fair market value of the stock
3. Repurchase the stock

Here’s what this might look like in practice:

*Cost Basis: $5,000; 24% Income Tax Bracket; 15% Capital Gains Tax Bracket*

Missing the Opportunity to Bunch Deductions

I often see clients giving the same amount to the same organization every year and missing out on significant tax savings. The issue? They’re itemizing deductions every year without maximizing the benefit.

Consider a "bunching" strategy: double your usual donation in one year and take the standard deduction in alternate years. This way, you increase your overall tax savings while maintaining the same total contributions to your chosen charities.

Consider two scenarios:

1.) A married couple gives $35,000 to their church in both 2025 and 2026.

2.) The couple saves their money in 2025 and takes the standard deduction. Then they “bunch” deductions and give $70,000 in 2026.

For simplicity, assume that the couple is in the 24% tax bracket and the standard deduction is $30,000.

That’s $7,200 of additional tax savings simply by bunching deductions for two years.

But what about the cash flow needs of the charity? That’s where Donor-Advised Funds (DAFs) come in.

Overlooking Donor Advised Funds

A Donor-Advised Fund can complement a bunching strategy beautifully. Piggybacking off of my last example, you can contribute $70,000 to a DAF in a single year (maximizing your deductions) but distribute the funds over time according to the needs of the charity.

Additional Benefits:

• DAF contributions can be invested, potentially increasing the impact of your gift.
• Ideal for years with higher-than normal income (e.g., Roth conversions, business sales, or large inheritances).
• Easy to set up and manage

If you’re charitably inclined, DAFs are worth exploring.

Failing to Communicate with Your Tax Preparer

If your accountant doesn’t know about your giving strategy, you could miss out on the tax benefits.
If know one tells them about your QCD, they might report the distribution as taxable income. Similarly, if you donate cash or appreciated assets, it isn’t the charity’s responsibility to tell the IRS about your generosity.

Your financial planner should work with you and your tax preparer to ensure that every gift is properly documented and communicated.

Not Having a Giving Plan

Finally, the most common and avoidable mistake is simply not having a plan. Many well-meaning individuals give reactively rather than proactively - writing checks here and there without a clear long-term strategy. While every dollar counts, a lack of planning can result in missed opportunities to maximize both the impact of your contributions and your own financial benefits.

Charitable giving is one of the most fulfilling ways to align your resources with your values. By avoiding common pitfalls—like ignoring QCDs, donating inefficiently, or failing to plan—you can make the most of your generosity.

When your decisions are Grounded in your values and aligned with a clear financial plan, your giving becomes even more impactful. Not only will you benefit the causes you care about most, but you’ll also create greater financial stability for yourself and your loved ones.

Give with purpose, plan with care, and watch your impact grow.