The tax benefits shouldn’t be your motivation for charitable giving. But for those who are already generous with their donations, strategic planning can save thousands in taxes, allowing you to give even more to the causes you care about.

With the passage of The One Big Beautiful Bill Act (OBBBA) in July 2025, the landscape of charitable giving has shifted once again. However, there are still options that have been available to taxpayers that should be considered.

Let’s explore four strategies that can help you maximize the impact of your charitable giving while minimizing your tax burden.

Strategy #1: Qualified Charitable Distributions (QCDs)

If you’re over age 70½ and/or taking Required Minimum Distributions from your IRA, Qualified Charitable Distributions might be the most powerful charitable giving tool available to you.

How QCDs Work

A QCD allows you to send money directly from your IRA to a qualified charity. The distribution counts toward your Required Minimum Distribution, but here’s the key advantage: the money never appears as income on your tax return.

This is more powerful than a standard charitable deduction because it reduces your Adjusted Gross Income (AGI) rather than just giving you a deduction. Lower AGI means potential benefits across your entire tax return.

The Rules You Need to Follow

To take advantage of QCDs, you must meet these requirements:

Age requirement: You must be at least 70½ years old (not just 70—the half year matters).

Source of funds: The distribution must come from an IRA, not a 401(k) or other retirement account.

Direct transfer: The check must go directly from your IRA custodian to the charity. You cannot deposit the money in your account first, even briefly.

Qualified charity: The recipient must be an IRS-recognized 501(c)3 organization.

Annual limit: You can donate up to $108,000 per person per year (so $216,000 for a married couple with separate IRAs) in 2025. These figures are indexed for inflation.

Why QCDs Are So Powerful

QCDs offer multiple tax benefits that stack up quickly:

Avoid income tax entirely. Unlike taking a distribution and then making a donation, the money is never counted as income in the first place.

Stay in lower tax brackets. By keeping the distribution out of your income, you’re less likely to be pushed into a higher tax bracket.

Reduce Social Security taxation. Lower AGI means less of your Social Security benefits may be subject to taxation.

Avoid IRMAA surcharges. Medicare premium surcharges are based on your income from two years prior. Lower AGI today means lower Medicare premiums in the future.

Protect the 0% capital gains bracket. If you’re trying to stay within the income threshold for the 0% long-term capital gains rate, keeping your RMD out of your income helps you stay under that limit.

Get a tax benefit even with the standard deduction. This is huge. Since the QCD reduces your income rather than providing a deduction, you get the benefit even if you take the standard deduction—which most retirees do.

Practical Application

Let’s say you’re 73 years old with an RMD of $50,000, but you only need $35,000 for living expenses. You regularly give $15,000 per year to charity. Instead of taking the full $50,000 RMD as income and then writing a $15,000 check to charity, you direct $15,000 as a QCD.

The result? Only $35,000 shows up as income on your tax return instead of $50,000. At a 22% tax rate, that saves you $3,300 in federal taxes alone—not counting the additional savings from potentially avoiding higher Medicare premiums or other forms of taxation.

Critical Action Step

Important: In the tax year 2025, a change will be coming to how the QCD is reported on the 1099. Be sure you match the QCD amount from the custodian to your 1040 when filing.

Strategy #2: Understanding the New OBBBA Charitable Deduction Rules

The One Big Beautiful Bill Act, signed into law on July 4, 2025, significantly changed the charitable giving landscape.

What Changed

Higher standard deduction: The standard deduction increased to $15,750 for single filers and $31,500 for married couples filing jointly in 2025. There’s also an expanded bonus deduction for taxpayers 65 and older through 2028.

Fewer itemizers: With the extension of these higher thresholds, it’s estimated that fewer than 10% of U.S. taxpayers will itemize deductions (as has been the case after the 2017 TCJA). This may create a “chilling effect” on charitable giving because most people won’t get any tax benefit from their donations.

New threshold for deductions: For those who do itemize, charitable deductions must exceed 0.5% of your AGI to be claimed.

Deduction caps: For high-income earners, the deduction for charitable gifts is capped at 35% (rather than the top 37% tax rate). However, the 60% of AGI contribution limit for cash gifts was permanently extended.

The Silver Lining: A New Deduction for Non-Itemizers

Starting in 2026, there’s a small but meaningful change: non-itemizers can claim a charitable deduction of $1,000 for single filers and $2,000 for married couples filing jointly.

This isn’t a huge amount, but it represents an important shift. It could re-motivate charitable giving among households who stopped donating after losing the ability to itemize under the Tax Cuts and Jobs Act.

Important limitation: Gifts to Donor Advised Funds (DAFs) don’t qualify for this new non-itemizer deduction.

The Strategy: Bunching Contributions

With standard deductions so high, the key strategy for many taxpayers is bunching—concentrating multiple years of charitable contributions into a single year.

Here’s how it works: Instead of giving $10,000 per year for four years, you give $40,000 in year one, then nothing in years two and three and four. In year one, you itemize and claim the $40,000 deduction (which exceeds the standard deduction). In years two, three, and four, you take the standard deduction.

This approach allows you to get a tax benefit from your charitable giving without actually changing the total amount you give over time—you’re just changing the timing.

Strategy #3: Donor Advised Funds (DAFs)

Donor Advised Funds are the secret weapon that makes bunching strategies practical and powerful.

What Is a DAF?

Think of a DAF as your personal charitable investment account. You make a contribution to the fund (which is managed by a sponsoring organization like Fidelity Charitable or Schwab Charitable), and that money is irrevocably committed to charity. You can then recommend grants from the fund to your favorite charities over time.

The Tax Advantages

DAFs offer several compelling benefits:

Immediate tax deduction: You claim the full deduction in the year you contribute to the DAF, even though you might not actually send the money to charities for years.

Tax-free growth: Any money invested within the DAF grows completely tax-free. If you contribute $50,000 and it grows to $65,000, that entire amount is available for charitable giving with no tax consequences.

Simplified giving: Once the money is in the DAF, you can easily make grants to multiple charities without having to transfer assets repeatedly.

Flexibility: You get the tax deduction now but decide which charities to support later. This is particularly helpful if you’re unsure which organizations you want to support or if you’re still evaluating different causes.

How to Use a DAF

Make your contribution: You can fund a DAF with cash, stocks, cryptocurrency, private business interests, or other assets. Contributions must be made by December 31st to count for the current tax year.

Claim your deduction: You claim the full value of your contribution as an itemized deduction in the year you make it.

Invest the funds: The money in your DAF can be invested in various funds, growing tax-free until you’re ready to distribute it.

Recommend grants: When you’re ready, you recommend grants from your DAF to qualified charities. You can make one-time gifts or set up recurring monthly donations. You do not get an additional tax deduction when the money leaves the DAF—you already got that benefit when the money went in.

DAFs and Bunching: A Perfect Match

DAFs make bunching strategies practical. Here’s why: You can contribute three or five years’ (or more) worth of charitable giving to your DAF in one year to exceed the standard deduction threshold and get the tax benefit. Then, even though you’ve made that large lump-sum contribution, you can still send monthly or annual grants from your DAF to your favorite charities, maintaining your regular giving pattern.

Your charities receive consistent support, you maintain your giving rhythm, but you’ve structured the contributions to maximize your tax benefits.

Practical Example

Maria and John typically give $15,000 per year to charity ($1,250 per month split among five organizations). With the $31,500 standard deduction, they get no tax benefit from their giving.

Instead, they contribute $45,000 to a DAF in year one (three years of giving). They can now itemize with $45,000 in charitable deductions, saving approximately $3,000 in federal taxes (at a 22% bracket). Over the next three years, they instruct their DAF to send $1,250 per month to their charities—maintaining exactly the same giving pattern. In years two and three, they take the standard deduction.

Result? Same total giving, but $3,000 in tax savings.

Strategy #4: Donating Appreciated Assets

This might be the most underutilized tax strategy available to charitable givers who have taxable investment accounts.

The Power of Appreciated Assets

When you donate stock, real estate, cryptocurrency, or other assets that have increased in value, you unlock a double tax benefit:

You avoid capital gains tax on the appreciation
You get a charitable deduction for the full current value, including the untaxed gain

Let’s say you own stock you purchased for $10,000 that’s now worth $30,000. If you sold it and donated the proceeds, you’d owe capital gains tax on the $20,000 gain (potentially $3,000 to $4,760 in federal tax, plus possible state taxes and Medicare surtax). Then you’d donate the remaining amount and get a deduction.

Instead, donate the stock directly to charity. You pay no capital gains tax, and you get a deduction for the full $30,000 value. At a 24% tax bracket, that’s a $7,200 deduction, plus you saved the $3,000+ in capital gains taxes you would have owed.

The Rules for Donating Appreciated Assets

Source matters: This strategy works for assets in taxable brokerage accounts, not retirement accounts like 401(k)s or IRAs.

Holding period: You must have owned the asset for at least one year to deduct the full fair market value. If you’ve owned it for less than a year, your deduction is limited to your cost basis.

Direct transfer: The asset must be transferred directly to the charity or DAF. Do not sell it first—that triggers the capital gains tax you’re trying to avoid.

Qualified recipient: The charity must be an IRS-recognized public charity or a DAF.

Choosing Which Assets to Donate

Not all appreciated assets are equal for charitable giving purposes. Here’s how to prioritize:

Donate highly appreciated assets. Focus on assets with the largest percentage gain, not just the largest dollar gain. An asset purchased for $5,000 now worth $25,000 (400% gain) is better to donate than one purchased for $50,000 now worth $75,000 (50% gain), even though the second has a larger dollar gain.

If the asset you purchased for $5,000 is donated, as opposed to the one purchased for $50,000, you could recognize a similar tax savings, despite the fact the out of pocket outlay is far greater in the second example.

Keep losers in your account. If an asset has declined in value, sell it instead of donating it. You can use the capital loss to offset gains or deduct up to $3,000 per year against ordinary income.

Consider the Medicare surtax. High-income earners (over $250,000 for married couples) pay an additional 3.8% Net Investment Income Tax on capital gains. Donating appreciated assets helps you avoid this as well.

The “Replace and Upgrade” Strategy

Here’s a sophisticated move: Donate your appreciated shares to charity, then immediately use cash to repurchase the same stock.

Why would you do this? You’ve now reset your cost basis to the current market price, eliminating the built-up gain that would have created a future tax liability. You still own the same investment, but with a higher cost basis, reducing your future tax bill when you eventually sell. And the charity received the full value without you paying capital gains tax.

This is completely legal and encouraged by the IRS. Unlike the “wash sale” rule that prevents you from claiming a loss if you repurchase a stock within 30 days, there’s no equivalent restriction on the gain side.

Combining Appreciated Assets with DAFs

DAFs make donating appreciated assets even more powerful. Here’s why:

When you donate stock directly to a charity, they must sell it to convert it to cash. If you support multiple charities, you’d need to coordinate separate stock transfers to each one—administratively complex.

Instead, transfer the appreciated stock to your DAF once. The DAF sells the stock (tax-free within the fund), and then you can easily make cash grants to as many charities as you want on whatever schedule you prefer.

Putting It All Together: A Comprehensive Strategy

The most sophisticated charitable giving strategies combine multiple approaches:

For retirees over 70½: Use QCDs as your primary charitable giving vehicle. They’re simple, effective, and work even if you take the standard deduction.

For donors with appreciated assets: Transfer highly appreciated stock to a DAF every few years (implementing a bunching strategy), then grant it out monthly or annually to maintain your regular giving pattern.

For everyone: Take advantage of the new $1,000/$2,000 non-itemizer deduction starting in 2026, but remember it doesn’t apply to DAF contributions.

Year-end planning: Make sure contributions are completed by December 31st, communicate with your tax advisor about QCDs, and review your investment accounts for highly appreciated assets before year-end.

The Bottom Line

Charitable giving should be motivated primarily by your desire to support causes you care about, not just by tax benefits. However, if you’re going to give anyway, it makes sense to structure your giving in the most tax-efficient way possible.

The strategies outlined here—QCDs, DAFs, bunching, and donating appreciated assets—can potentially save you thousands of dollars in taxes while allowing you to give more to the charities you support. The key is understanding the rules, planning ahead, and coordinating with your financial advisor and tax professional.

With the higher standard deductions under OBBBA, fewer taxpayers will get tax benefits from charitable giving. But for those who implement these strategies thoughtfully, the potential tax savings are more significant than ever.

The content of this blog is intended to be for informational and educational purposes only. Content should not be considered individualized investment advice and should not be considered advisory services provided by Hyperion Financial, LLC (“Hyperion”). Hyperion can only provide advisory services to clients who have entered into an advisory agreement and who have received required disclosures. No content should be considered a recommendation that any particular investment strategy, portfolio, or transaction is suitable for any specific person.