Charitable Giving 101: A Beginner’s Guide to Tax-Smart Donation Strategies

December 9, 2025  | By Nikki Yates CFP®

The holiday season is upon us, and with that often comes a desire to give back. Whether through volunteering your time, sharing your expertise, or donating  resources like clothing, food, and money, there are many ways to support the communities and causes we care about.  If you’re feeling charitably inclined this holiday season, there are several strategies that can boost the impact of your donations. In this article, we’ll explore different charitable giving vehicles and how each one can impact your donations, taxes, and cash flow. 

Define Your Charitable Goals 

Step one: identify the causes that matter most to you and align with your values. Being intentional about where you give your time and resources will make for a much better experience for you. 

For tax purposes, charitable contributions are deductible only if the recipient is a qualified charitable organization (a 501(c)(3) organization) in the eyes of the IRS. These include, but are not limited to: A foundation, trust, or community chest created in the U.S. and operated exclusively for charitable, religious, scientific, literary, or educational purposes. A church, synagogue, mosque, or other religious organization. 

You can verify an organization’s status and search for more organizations using this IRS website tool.

Evaluate Your Financial Plan 

The next thing to consider is how much you are able to give. Be realistic about your cash flow and savings if you’re donating cash, and about your portfolio if you plan to give appreciated stock to your favorite charity. While your goal might be generous and intend to help many people, it’s important to ensure you’re taking care of your own financial needs. As the airplane analogy goes, put your oxygen mask on first before assisting others.

Charitable Giving Options & Their Tax Benefits

To receive a tax deduction for charitable gifts, you must itemize your deductions and complete donations by December 31. Non-cash gifts often require additional processing time, so coordinate early with your advisor.

Direct Giving

Cash Gifts

The simplest option. Cash donations to public charities are generally deductible up to 60% of AGI. Keep receipts and documentation.

Appreciated Stock

Ideal if you hold large taxable positions. Donating shares directly avoids capital gains tax and allows you to deduct the stock’s fair market value (up to 30% of AGI, with a five-year carryforward).

Donor-Advised Funds (DAFs)

A flexible, tax-efficient way to manage giving.

• Immediate tax deduction in the year you contribute
• Tax-free investment growth inside the DAF
• Can donate cash, stock, ETFs, or crypto
• Useful for “bunching” deductions in high-income years

Private Foundations

Offer significant control but require more administration and regulatory oversight.

• Best for large or complex giving strategies
• Must distribute 5% of assets annually
• Deduction limits: cash up to 30% of AGI, stock up to 20%

Charitable Trusts

Useful for long-term giving and estate planning.

Charitable Remainder Trust (CRT): Provides income to you first, then the remainder goes to charity. Offers immediate tax deduction and capital gains deferral.

Charitable Lead Trust (CLT): Charity receives income first, remaining assets pass to you or your heirs—often reducing gift or estate taxes.

With many giving strategies available, thoughtful planning can maximize your impact and your tax benefits. Your AWM advisor can help determine which approach best aligns with your philanthropic goals and financial plan.