Savvy financial advisors are helping clients optimize their charitable giving strategies, especially as the holiday season approaches.
This year’s planning takes on heightened importance following the passage of the One Big Beautiful Bill Act (OBBB), which permanently extended the Tax Cuts and Jobs Act provisions while introducing a significant change for charitable giving.
Beginning January 1, 2026, itemized charitable deductions will be subject to a new 0.5% AGI floor – meaning clients must exceed 0.5% of their AGI before any charitable deduction applies.
With 2025 being the last year without this limitation, you have a unique opportunity to help your clients maximize their charitable impact while minimizing their tax burden. Consider the following strategies:
Qualified Charitable Distributions: More Valuable Than Ever
Qualified Charitable Distributions (QCDs) represent one of the most powerful tax-efficient giving strategies available to clients over 70½. For 2025, clients can distribute up to $108,000 directly from their IRA to qualified charities, with these distributions counting toward required minimum distributions. What makes QCDs particularly valuable is their ability to bypass Schedule A itemized deductions, providing substantial tax benefits even for clients taking the standard deduction.
Unlike other charitable giving methods, QCDs aren’t subject to Adjusted Gross Income (AGI) limitations, offering unique flexibility in tax planning. Importantly, QCDs will completely avoid the new 0.5% AGI floor starting in 2026, making them even more valuable going forward. This strategy extends beyond personal IRAs – inherited IRA beneficiaries over 70½ can also utilize QCDs, creating additional planning opportunities for clients managing inherited retirement assets.
Key Implementation Tips:
- Ensure checks clear by December 31st for current-year tax benefits
- Document all QCD distributions meticulously for tax reporting
- Consider setting up dedicated QCD checkbook access for frequent givers
[Related: The One Big Beautiful Bill Act (OBBB): Key Tax Changes Advisors Should Know]
Donor-Advised Funds: Why Timing is Everything
Donor-advised funds offer sophisticated planning opportunities, particularly valuable during this transition period. These vehicles provide immediate tax deductions while allowing clients to maintain control over the timing of charitable distributions. This flexibility becomes especially powerful when working with highly appreciated investments, as clients can avoid capital gains taxes while securing deductions at fair market value.
With the OBBB making the Tax Cuts and Jobs Act provisions permanent and the new charitable floor approaching in 2026, consider accelerating DAF funding in 2025.
The permanent higher standard deductions creates opportunities to optimize charitable giving across tax years. Consider “stacking” multiple years of planned giving into a single year to maximize deduction benefits when they’ll provide the most value. Additionally, donor-advised funds offer powerful legacy planning opportunities through successor naming, ensuring family charitable traditions continue for generations.
[Related: 4 Types of Roth Conversion Strategies to Manage Taxes]
Asset Selection: Maximize Tax Benefits with Appreciated Securities
When it comes to charitable giving, selecting the right assets can dramatically impact both the tax benefit and overall gifting strategy. High-net-worth clients often hold significantly appreciated stock positions that create substantial capital gains exposure. By strategically selecting these appreciated stocks for charitable contributions, advisors can help clients avoid capital gains taxes while securing a deduction at full market value.
This strategy becomes particularly powerful when stocks are trading at all-time highs. For clients concerned about maintaining market exposure, consider implementing a strategic repurchase of the gifted positions. This creates a valuable cost basis step-up while maintaining the desired portfolio allocation.
Note: Starting in 2026, the OBBB caps the charitable deduction benefit for top-bracket taxpayers at 35 cents per dollar rather than 37 cents.
Don’t Forget About Documentation
Even the most carefully crafted charitable giving strategy can fail without proper documentation. The IRS maintains strict requirements that demand attention to detail. For all gifts exceeding $250, clients must obtain contemporaneous written acknowledgment before filing tax returns, or the deduction could be disallowed regardless of the gift’s legitimacy.
Essential Documentation Requirements:
· Written acknowledgment explicitly stating “no goods or services were received”
· Contemporaneous receipt obtained before tax filing
· Clear records of all QCD transactions
· Verification of qualified charity status
[Related: Tax Planning Strategies To Help You Serve Women Clients]
Elevate Your Practice with Tax Management
As tax laws grow increasingly complex and high-net-worth clients demand more sophisticated planning, financial advisors face mounting pressure to deliver comprehensive tax strategies.
Through C2P’s Tax Management Journey® training, advisors learn our proven seven-step process for delivering proactive tax management to clients. This comprehensive, 2-day training program equips you with tools and strategies to assist clients with charitable giving, tax bracket management, asset allocation optimization, and strategic timing of distributions.
With that being said, understanding charitable giving strategies is just one piece of comprehensive tax management. Beyond charitable strategies, you’ll also learn how to:
- Implement proactive tax management throughout the year
- Convert tax knowledge into higher planning fees and enhanced client value
- Partner with CPAs and tax professionals to expand your service offerings
- Attract and retain high-net-worth clients through comprehensive tax management
- Navigate the new OBBB provisions including the charitable floor, permanent TCJA rates, and enhanced business deductions
Get Specialized Support in Tax Management
Schedule a 20-minute consultation with our team to learn more about how implementing The Tax Management Journey® can help you build a more successful practice.
During your consultation, you’ll also discover how C2P’s comprehensive suite of training programs and resources can further elevate your expertise and differentiate your practice.
Enhance your Tax Management Expertise with our On-Demand Planning Podcasts
This blog post is based on insights from myself and Jeff Warnkin, CPA, CFP® of JL Smith Holistic Wealth Management.
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For Financial Professional Use Only
The information provided in this presentation is not intended as investment advice or legal advice. The information provided is for informational and training purposes only. The information in this presentation was accurate as of the time the material was created. Tax laws and rulings can frequently change. Please discuss the client’s current situation with an accountant or tax advisor.