Charitable Giving Strategies for Retirees: How to Maximize Your Tax Benefits
- Travis Tsukayama, CFP® CFA
- Sep 13
- 9 min read
Updated: Oct 1
Image Credit | zimmytws | Adobe Stock
“There is no better exercise for your heart than reaching down and helping to lift someone up” – Bernard Meltzer
Generosity is a common trait among many of the clients we work with. Making charitable donations and engaging in volunteer work allows them to support causes and organizations they hold most dear and satisfy a desire to give back.
Besides the internal satisfaction derived from charitable giving, there can also be a financial benefit in the form of tax savings. This is where confusion can set in, and the result is a missed opportunity to lower your tax bill. Receiving a tax break is not the main benefit of giving to charity, but paying less in taxes can allow you to give more dollars to your favorite charity rather than the IRS. Many of our clients give to charity every year – we help ensure they receive the full tax benefit of giving by educating them on what gifting strategy would best suit their situation.
In this article we’ll look at:
The tax rules to know before making a gift to charity.
The different ways retirees can give to charity and maximize their tax savings.
Why communicating with your CPA and financial advisor is essential to making your charitable gifting tax strategy work.
Tax Rules for Charitable Giving
Image Credit | Richard | Adobe Stock
I’ve experienced the following situation more than once this year when meeting with new potential clients for the first time:
When I ask about their charitable giving goals, they share with me that they write a check to donate to their favorite charity every year. In total they give a few thousand dollars.
They are retired with no mortgage and are relatively healthy. After adding up all their itemized deductions (including their gift to charity), it still does not exceed their sizeable standard deduction.
Even though they give thousands to charity every year, they aren’t receiving a tax benefit from their donations.
Charitable Giving: Standard Deduction vs. Itemizing
Many people are not aware they’re missing an opportunity to save on taxes. This is a common oversight and fortunately there are straightforward ways to fix it. The determining factor comes down to the amount of deductions you can itemize compared to the standard deduction.
Let’s demystify this:
In 2025, the standard deduction amount for a married couple filing jointly over age 65 is $34,700. That means all your itemized deductions combined must be more than your equivalent standard deduction to recognize a tax benefit from writing a check to charity. Common itemized deductions are medical expenses, state and local taxes, mortgage interest, and charitable contributions.
The IRS estimates that 90% of taxpayers take the standard deduction. Many donors give to charity without receiving a tax benefit because the standard deduction is greater than their combined itemized deductions.
I’ll mention here that the “One Big Beautiful Bill Act” introduced new tax provisions regarding charitable giving. Among them:
Above-the-line deductions for non-itemizers: Beginning in 2026, a charitable deduction up to $1,000 (single filers) and $2,000 (joint filers) for taxpayers taking the standard deduction.
Beginning in 2026, a floor will be enforced on deductible charitable gifts. Donations will be deductible to the extent they exceed 0.5% of AGI.
Deduction Limits Based on Adjusted Gross Income
Donations of cash made to a qualified charity are deductible up to 60% of Adjusted Gross Income
Non-cash donations (such as company stock) are deductible up to 30% of AGI
If your donations exceed the deductible AGI limit, you can carry over unused deductions for up to five years.
Eligible Charities for Tax-Deductible Donations
To qualify for a tax deduction, the receiving charity must be a 501(c)(3) organization:
Schools and universities
Hospitals
Religious organizations
Relief and service groups
Private foundations (with stricter deduction limits)
Donations to the following groups likely do not qualify as a deductible gift:
Individuals (GoFundMe campaigns)
Political candidates
For-profit organizations
Before donating, confirm you are giving to a tax-exempt organization. The IRS has a search tool online for this: https://apps.irs.gov/app/eos/.
Documentation and Tax Forms Needed for Charitable Contribution Deductions
If you plan on claiming a deduction for your charitable giving, it’s important to keep good records. The IRS requires varying levels of recordkeeping depending on whether you made a cash or non-cash donation, and the amount given.
Cash Donations to Qualified Charities
It’s good practice to keep a receipt from the receiving charity as proof of your gift. If your cash gift exceeds $250, you are required to provide a receipt stating the amount of your gift, the date it was made, and whether the organization provided any goods or services in exchange for the donation.
Cash gifts of less than $250 do not require a receipt, but you should be ready to provide a bank statement showing the gift was made.
Non-Cash Donations to Qualified Charities
Image Credit | JJ Gouin | Adobe Stock
The recordkeeping requirements differ by amount for non-cash donations.
For non-cash gifts of less than $250, you need to provide a receipt from the organization. The exception is if you drop off items at an unmanned location.
Gifts exceeding $250 require receipt of written acknowledgement from the organization.
Once your non-cash gift exceeds $500, you’ll need to provide a record of how you acquired the donated asset and its cost basis. The appropriate sections of Tax Form 8283 must be completed and filed with your tax return including this information.
Qualified Charitable Distribution: Tax Form 1099-R
When you donate to charity directly from your IRA via Qualified Charitable Distribution (more on this later), you will receive Tax Form 1099-R the following year, documenting your total distribution from the IRA.
Prior to this year, the 1099-R would not indicate that a distribution from the IRA was a tax-exempt gift to charity. It was up to the taxpayer to indicate on their tax return that a QCD was made so they wouldn’t get taxed on the distribution.
The IRS introduced a new requirement that beginning in 2025, the 1099-R must reflect that a distribution was made and code it as a QCD. It will still be up to taxpayers and their CPAs to determine that QCD rules were followed and claim an exemption on their tax return.
Three Tax-Smart Ways Retirees Can Give to Charity
In addition to writing checks directly to charity, here are three ways I’ve seen retirees structure their charitable giving to be more tax-efficient.
Using Qualified Charitable Distributions (QCDs) from IRAs
This is the most popular gifting method I see among our retiree clients.
How it works: You give cash directly from your IRA to charity. The IRA custodian cuts a check made payable to the charity and mails it directly to the organization.
You must have reached age 70 ½ before you can do a QCD. Gifts via QCD are limited to $108,000 per person in 2025.
The QCD can be made from a Traditional IRA, inherited IRA, inactive SEP and Simple IRAs, but not from company retirement plans such as 401k and 457.
The benefits: Assuming the recipient is a qualified charity and the funds don’t pass through the IRA owner’s bank account first, the distribution is not considered taxable. If you’re required to take RMDs, the QCD can satisfy your RMD without you having to pay the tax on the distribution. You can continue to claim the standard deduction (don’t need to itemize the donation) and still receive the tax benefit of giving to charity.
Donating Appreciated Stock Instead of Cash
If you take a look at your stock portfolio, chances are that you have one or a handful of companies that you can’t sell without triggering a tax bill.
It’s a problem that many retirees face. You bought shares of XYZ company thirty years ago when it was inexpensive, and over the decades it has appreciated beyond your wildest imagination. Now you sit on this behemoth stock position because 1) financially, it’s the best purchase you’ve ever made and 2) to trim its shares down to a manageable portion of your net worth would mean recognizing outsized capital gains taxes that you’d rather put off until later.
The problem, of course, is that this one stock now represents a greater percentage of your portfolio than you had ever intended. If diversification is an important part of your investing philosophy going forward, you would feel more comfortable reducing your position and buying shares of other companies.
When used as a charitable gifting strategy, donating appreciated stock can both reduce your concentrated stock position and qualify for a tax deduction.
How it works: Donate appreciated investments (stock, index funds) in-kind from your non-qualified investment accounts to charity. Rather than selling shares to cash first, donate shares directly.
The benefits: Doing it this way allows you to bypass the capital gains tax realized upon liquidating shares. As a result, your adjusted gross income is lower and eliminates the additional capital gain income that would be subject to Medicare surtax and Net Investment Income Tax. Additionally, you are able to donate the full market value of your stock to charity instead of reducing it for capital gains taxes.
Setting Up a Donor Advised Fund
Another common gifting strategy uses Donor Advised Funds (DAF).
How it works: Contribute cash, securities, or other assets to the DAF and receive an immediate tax deduction. The funds can then be invested, grow tax-free, and distributed to qualified charities over several years.
Deduction limits:
Gifts of cash: Deductible up to 60% of AGI
Long-term appreciated assets: Deductible up to 30% of AGI
Excess contributions can be carried forward as deductions to offset taxes for up to five years.
The benefits: Donor Advised Funds are a great tool for individuals or families who want to engage in philanthropy and retain the flexibility to distribute donations over time instead of making one-time gifts. If you contribute appreciated stock to a DAF, you can immediately sell it, diversify your holdings, and grow the funds tax-free.
If you find yourself in a year with unusually high income from a windfall or business sale, using a DAF can help offset the income tax by providing an immediate tax deduction. Keep in mind that a QCD cannot be used to fund a Donor Advised Fund.
Why Communication With Your CPA and Financial Advisor Matters
Image Credit | whyframeshot | Adobe Stock
This is essential to ensure your tax strategy works as intended.
If you and your advisor aren’t on the same page about your charitable intent, you may be missing out on tax-efficient donation strategies.
If your CPA doesn’t know that you made charitable gifts this year, they may not account for it on your tax return.
A good example is accounting for Qualified Charitable Distributions prior to 2025. Since the 1099-R tax form previously had no code indicating the withdrawal was a QCD, it wasn’t uncommon for CPAs to mistakenly count it as a taxable distribution. All the planning work done to execute a QCD donation falls by the wayside unless your CPA knows about your charitable intent and prepares the tax return accurately.
Another example is deciding to donate appreciated stock to charity vs. cash. Share your charitable intentions with your financial advisor and they can steer you towards the option of donating highly appreciated stock instead of cash to maximize your tax savings.
As financial advisors, here are some measures we’ve found to be successful in supporting CPA/client/advisor communication and minimizing mistakes:
Sending a 1099 tax letter to all clients in January with a list of tax strategies we utilized in the previous year (including charitable giving strategies) and encouraging them to forward a copy to their CPA.
Reviewing client tax returns annually to ensure planning strategies recommended by our office show up accurately on the tax return filing.
Communicating directly with client’s CPAs with client approval to share valuable information that will benefit the client’s tax situation.
If you’re planning to review your charitable giving strategy, now is the time to do so. There is enough time to implement a new plan before the end of the year and make your donations more tax-efficient. If you’ve already made your donations for the year, look ahead to next year, keeping changes from the new tax bill in mind. Tax rules can change, so consult your CPA or financial advisor before taking action.
Year-End Checklist for Charitable Giving and Taxes
o Confirm receiving charity is a 501(c)(3) non-profit organization
o Decide what gifting strategy works for you (QCD / donating stock / Donor Advised
Fund)
o Notify your CPA and financial advisor
Talk soon,
Travis
Comments