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How to Make the Most of Your Charitable Giving

By Contributor
Law

Choosing a Cause That Matters

By Gina M. Barry, Esq.

 

As we come to the holiday season, charitable giving comes to the fore. Do you donate money to charity each year? Perhaps you donate to an organization dedicated to finding a cure for an awful disease. Perhaps you choose to benefit organizations that support and encourage positive growth in our youth. Perhaps you decide to support the local animal shelter or abuse prevention.

To reap the most benefit from charitable giving, you must first choose an appropriate charity to benefit from your generosity. There are thousands of charities working within a huge variety of causes from which to choose. Thus, you can be certain there is a charity working to bring positive change in a way that you would love to support. Of course, the causes touched upon above are just a few examples of where your donation can make a difference.

Once you have decided that you would like to support a charitable cause, it is important to determine how you will contribute. Most will choose to donate cash; however, you might also consider donating highly appreciated securities, which would allow you to avoid paying the capital gains tax on those assets. Likewise, the charity also would avoid paying this tax due to its charitable status.

Aside from a monetary donation, you may also donate goods. When purging your household to make way for new holiday items, you can donate those that are gently used, but no longer desired. For example, you may have a pantry full of uneaten, non-perishable food that your family is not eating. Consider filling a couple of grocery bags with this food and donating to your local food pantry.

Gina M. Barry“Donations claimed as tax-deductible contributions for 2025 must be actually paid to the charity on or before Dec. 31, 2025, and it is best always to obtain a receipt for your donation regardless of the amount.”

Likewise, children often grow out of clothes and get bored with their toys while they are still in good repair. Many charities that benefit children would be delighted to receive these clothes and toys to help the children that they serve. Similarly, when you and your old vehicle finally part ways, you do not have to send the vehicle to a junkyard. Many charities accept any vehicle, working or not, as a donation.

If making a monetary contribution or a donation of goods is not possible at this time, consider volunteering your time to your favorite cause. Elder services, animal shelters, hospitals, and soup kitchens are all wonderful places to volunteer. While the time you volunteer is not tax-deductible, any out-of-pocket expenses associated with volunteering are usually deductible. For example, travel expenses to and from the volunteer site, as well as parking fees and tolls, may be deducted.

 

Next Steps

When you have decided which cause you would like to help and in what manner, you are almost ready to make a donation. Be certain the charity has received approval from the Internal Revenue Service (IRS) as being eligible to receive tax-deductible contributions. You can determine the tax-exempt status of an organization either by contacting your local IRS office or by asking the organization for a copy of its ‘letter of determination,’ which is the formal notification the organization receives from the IRS once its tax-exempt status has been approved. Also, IRS Publication 78, Cumulative List of Organizations, is an annual listing of thousands of organizations that can accept tax-deductible donations.

Donations claimed as tax-deductible contributions for 2025 must be actually paid to the charity on or before Dec. 31, 2025, and it is best always to obtain a receipt for your donation regardless of the amount. When considering donating to charity, it is also important to check in with your tax advisor, as there have been some important changes.

For example, starting in 2026, even taxpayers who take the standard deduction (i.e., don’t itemize) can claim a modest ‘above-the-line’ deduction — up to $1,000 for singles and $2,000 for married couples filing jointly. For those who do itemize, deductions for charitable contributions will apply only to the portion that exceeds 0.5% of adjusted gross income. That means the first 0.5% of adjusted gross income in charitable gifts each year will not reduce taxable income. Further, in 2026, the tax benefits of itemized charitable deductions will be capped at 35%, even for those in the 37% marginal tax bracket. Thus, to make the most of your charitable giving, be sure to consult your advisor before making your donations.

Charitable giving is extremely rewarding. You will not only reap the benefit of knowing that you are helping to make a difference in this world, but when tax season comes, you may enjoy a beneficial tax deduction as well.

 

Gina M. Barry is an attorney in the Springfield office of Bacon Wilson, P.C. She is a member of the National Academy of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Assoc. She concentrates her practice in the areas of estate and asset protection planning, probate administration, guardianships, conservatorships, and residential real estate.

How to Choose the Right Charitable Giving Vehicle for Your Goals

By Contributor
Wealth Management

Maximum Impact

By Michael Orszulak

 

If giving is in your heart, charitable planning vehicles have likely been a topic of conversation with your advisor. There are a variety of options, and each has its own benefits, from tax advantages to grant control.

I advise using the following planned giving vehicles to maximize your impact on charitable causes and see your generosity go further. Consider these common charitable giving vehicles as part of your financial plan.

 

Private Foundation

A private foundation might be the most recognized charitable giving vehicle among wealthy donors. Having one is often seen as a sign of success. They can be funded with assets like cash, private equity, publicly traded securities, tangible assets, real estate, and intangible personal property. All foundations are required to distribute at least 5% of their assets to charities or qualifying individuals each year.

Private foundations can engage in philanthropic activities that are not available through other giving vehicles, including distributing donations to individuals. Donors have complete control over granting (as long as it is charitable in nature) and investment decisions.

A foundation can exist in perpetuity, creating an enduring family legacy, and the collaborative board structure encourages family engagement. Invite your family members to become board members or vote on where charitable funds are distributed. Depending on the level of involvement your family members want, you may be able to hire one of them to manage the foundation.

Michael Orszulak

Michael Orszulak

“Private foundations can engage in philanthropic activities that are not available through other giving vehicles, including distributing donations to individuals. Donors have complete control over granting (as long as it is charitable in nature) and investment decisions.”

Alternatively, you can hire a professional operating partner to oversee the administrative tasks associated with the foundation, as such tasks can become complex. Private foundations are a great solution for those who want to run their own charity, employ staff, and have greater flexibility in grant making.

 

Donor-advised Fund

A donor-advised fund (DAF) is like having a designated bank account for charitable giving. You can contribute to the DAF as often as you like, with cash, securities, or even other illiquid assets. You receive a tax deduction upon funding the account for the full fair market value, but don’t have to distribute the contributions until a later date.

DAFs are a popular choice because they offer great tax benefits and flexibility. The tax deduction for contributing cash can be up to 60% of adjusted gross income and 30% for long-term appreciated assets. (That compares to 30% and 20%, respectively, for a private foundation.) And you can involve your family in charitable giving through a DAF by requesting grant nominations from family members, like a private foundation, but without the formalities of board meetings and minutes.

There are no mandatory annual distributions, and you can even remain anonymous. DAFs also have less of an administrative burden than that of a private foundation; however, you are limited to disbursing funds to only qualifying charitable entities. If you want a simple solution with low costs and the potential to grow tax-free, a DAF might appeal.

 

Charitable Remainder Trust

A charitable remainder trust (CRT) is an ideal option if you’re interested in earning income over a period or for life while also contributing to a charity (or charities) of your choice. This irrevocable trust provides you or your beneficiaries with regular income. At the time of your death, the remaining assets are given to the designated charity.

You contribute assets to the trust and obtain a current-year personal income tax deduction, based on the estimated value set to go to charity. In the case of a charitable remainder annuity trust, you’ll get a fixed annuity amount every year for the term; for a charitable remainder unitrust, the annual distribution is a percentage of the trust, typically between 5% and 50%.

In most cases, a donor-advised fund can also be named the charitable beneficiary. A scenario that might lend itself well to a CRT is when you want a trust that can generate income for heirs or charities.

 

Charitable Lead Trust

A charitable lead trust (CLT) is an irrevocable trust that lets you donate money to charitable organizations for a specific period before giving the remaining assets to your family or other beneficiaries — essentially the reverse of a CRT. It’s an efficient way to transfer assets and can help reduce your taxes while making a positive impact through charitable giving.

You donate assets to the trust, choose one or more charitable organizations, and distribute regular donations to them from the trust. The assets that remain in the CLT upon its termination go to your family and are free of estate and gift taxes. Similar to a CRT, a CLT can benefit investors who wish to generate income for a cause.

 

Bottom Line

Incorporating charitable giving in your planning is a noble effort that allows you to leave a legacy of generosity and goodwill with your wealth. Speak to your advisor about your philanthropic goals to determine which charitable giving vehicle is best matched to help you achieve them.

 

Michael Orszulak is vice president of PeoplesWealth Advisory Group and senior wealth advisor with Raymond James Financial Services Inc.

Sources: foundationsource.com. Securities offered through Raymond James Financial Services Inc., member FINRA SIPC, and are not insured by bank insurance, the FDIC, or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. PeoplesWealth Advisory Group and PeoplesBank are not registered broker/dealers, and are independent of Raymond James Financial Services. Investment advisory services offered through Raymond James Financial Services Advisors Inc. Donors are urged to consult their attorneys, accountants, or tax advisors with respect to questions relating to the deductibility of various types of contributions to a donor-advised fund for federal and state tax purposes. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Please be aware that there may be substantial fees, charges, and costs associated with establishing a charitable trust. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Michael Orszulak and not necessarily those of Raymond James.

The Benefits of Charitable Giving to Donor-advised Funds

By Contributor
Accounting and Tax Planning Special Coverage

A True Win-win

By Lauren Foley

What if there were a way to support a preferred sponsoring organization while also receiving a valuable tax benefit? Giving to a donor-advised fund (DAF) might be your answer.

DAFs offer a unique opportunity to make a significant impact while enjoying both the emotional satisfaction of giving and the financial benefits of charitable deductions. They are an ideal avenue for increasing community involvement and charitable giving, as well as obtaining a favorable tax deduction. Whether you’re an individual or a corporation, DAFs can help streamline your charitable efforts.

A donor-advised fund, or DAF, is defined by the IRS as “a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors.”

Funds are added to the account, and, like an investment, the value will fluctuate based on the stock market. This gives donors the potential to grow their charitable giving over time. When the DAF increases in value or reports a gain, the gain is not taxable to the donor.

The key benefit of investing in a DAF is that the donor does not incur taxes on the growth of their investment. This feature makes DAFs a great option for those looking to maximize their charitable contributions without the burden of additional taxes. Another benefit is that the donor can invest not only cash, but also non-cash assets such as stocks, bonds, and real estate, depending on the specific sponsoring organization, offering even more flexibility in how donations are made.

 

How Does a Donor-advised Fund Work?

The mechanics of a donor-advised fund are relatively simple, but the possibilities for giving are vast. The money deposited and invested into a DAF must be used to donate to a certified charitable organization. The taxpayer can recommend which charitable organization will receive the donation, providing a sense of control over where their funds go. Once determined, the sponsoring organization retains final authority over whether to accept the recommendation.

Lauren Foley

Lauren Foley

“Funds are added to the account, and, like an investment, the value will fluctuate based on the stock market. This gives donors the potential to grow their charitable giving over time. When the DAF increases in value or reports a gain, the gain is not taxable to the donor.”

However, it is important to note that the taxpayer loses legal control over the funds once they are added to the account. This is an important distinction, as the fund is ultimately governed by the sponsoring organization. In other words, a DAF is a low-cost alternative to a private foundation.

 

How Does a Donor-advised Fund Affect Your Tax Return?

If a taxpayer itemizes on their personal tax return (Form 1040), the DAF is a great way to increase charitable giving while simultaneously lowering taxable income. When itemizing, cash contributions made through a DAF will be deducted from the taxpayer’s taxable income.

Keep in mind that there are limitations on charitable contributions, including special limits on contributions to DAFs in one tax year, so it’s important to seek advice from a CPA or accounting firm to ensure you stay within the legal guidelines and make the most of your charitable contributions.

A taxpayer can avoid selling securities or non-cash assets and reporting a capital gain by donating them directly to a DAF. By donating the securities directly to a DAF, the taxpayer can avoid the capital-gains tax on the sale of securities. This can be particularly advantageous for individuals who have appreciated assets like stocks or real estate.

As mentioned earlier, the fair market value of donated securities can be deducted from the donor’s taxable income, up to 30% of adjusted gross income. Any amount that is limited during the year the donation is contributed to the DAF can be carried forward to future years. Any future appreciation — whether from dividends, interest, or further gains — while the securities are held within the DAF remains tax-free. Since the DAF is a tax-exempt entity, it does not pay taxes on these gains, either. This makes donating appreciated securities to a DAF an effective way to maximize both charitable giving and tax savings.

There is some control of itemized deductions when donating to charity as the state taxes are capped at $10,000, so investing in a DAF is a good way to group donations. It will allow the donor to take a large charitable donation deduction in one year and then recommend distributions to favorite charities over the next few years.

For corporations, charitable contributions are generally limited to 10% of the company’s taxable income for the year. In contrast, S-corporations and partnerships are pass-through entities, meaning they do not pay income taxes at the corporate level. Instead, income and deductions pass through to the individual owners, who can then deduct their share of the donation on their personal tax returns based on their ownership percentage. This makes DAFs an especially attractive option for business owners who want to incorporate charitable giving into their overall tax strategy.

 

The Act of Giving

The most important aspect of a donor-advised fund is that it allows taxpayers to invest in charities, support growth and culture for future generations, and give back to those in need. A donor-advised fund allows for the donor to plan and track their charitable donations over time. A DAF opens doors for increased giving and provides taxpayers the opportunity to reflect on their priorities while making a difference in the lives of others.

As always, when engaging in tax planning or investing in a new fund, working with an experienced financial advisor or tax professional can help you navigate donor-advised funds.

 

Lauren Foley is a senior associate at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.