Five Tax-Efficient Approaches to Charitable Giving

Strategies to support philanthropic goals while optimizing tax outcomes.

Many people consider charitable giving to support causes that make a positive difference. Philanthropy can be rewarding, particularly when it aligns with your values. It can also create an enduring legacy to be remembered by family, friends, and those who benefit from the generosity.

As year-end approaches, many potential donors start to explore what they can afford to gift and giving options. Fortunately, some strategies can help maximize both impact and tax advantages. Here are five to consider:

1. Maximize giving through specialized charitable vehicles

There are a variety of specialized charitable vehicles that enable giving in a tax-efficient manner.

• A donor-advised fund (DAF) is a method that allows donors to make an initial charitable contribution, receive an immediate tax deduction, and provide grants over time. The assets can be invested tax-free in the interim, potentially increasing the charitable benefit.
• Charitable trusts can be an effective way to donate to a charity while generating income for both the donors and selected charities. The donors contribute cash or non-cash assets such as securities to create the charitable trust. The structure of the trust can vary based on when the donor desires to give to charity and whether they wish to generate income for themselves or beneficiaries. The nature of tax benefits will be based on the specific design of the trust.
• A family foundation is another possible method. Donations into family foundations can qualify for tax deductions. Foundations also have an annual distribution requirement which promotes discussion between Trustees and family members, helping foster a spirit of philanthropy for future generations. However, it is essential to note that a foundation will have an excise tax, tax filing requirements, and must adhere to other regulations.

Each of these specialized vehicles offers advantages and complexities, so careful analysis with a financial, tax, or estate professional is imperative.

2. Give long-term appreciated securities

Rather than giving cash, one tax-savvy approach may be to give long-term appreciated securities. This entails contributing stocks, bonds, or mutual funds that have been held for over a year and have appreciated over time. The fair market value of the securities can be a tax deduction, and no capital gains taxes are owed when the securities are donated. The charity is then able to sell the securities without being taxed and use the proceeds for its programs.

3. Donate with a qualified charitable distribution (QCD)

QCDs enable individuals to make direct donations from retirement accounts, thereby reducing personal taxable income and overall estate value. A QCD allows donors age 70 ½ and older to make tax-free donations directly from an IRA to a qualified charity and can help satisfy RMD requirements that commence at age 73. An RMD (required minimum distribution) is the minimum amount you must withdraw each year from certain retirement accounts. QCDs can be a helpful way to redirect your RMDs and potentially reduce your tax bracket.

4. Name a charity as a designated beneficiary

Another tax-minded strategy is to designate a charity as a beneficiary for retirement, trusts, or other investment accounts. Unlike individuals, charities do not have to pay income tax on granted assets, allowing the giving to have a greater effect.

5. Review portfolio for non-publicly traded assets

It is also possible to donate non-publicly traded assets such as private company stock, restricted stock, or real estate. Tangible property, including artwork, jewelry, and other collectibles, can be an option for giving. While sometimes advantageous, this approach may require a valuation or pose a challenge for the charity to manage liquidation of the assets. Donor tax benefits may include a tax deduction for the value of the assets or avoidance of capital gains tax on the appreciation.

Bringing It All Together

Charitable giving in a tax-efficient manner can be complex, but it can ultimately be very worthwhile. When approaching charitable giving, it is most important to select a cause that is meaningful and effective, while always considering your broader financial picture. There are a multitude of giving approaches, and certain provisions of recent legislation through The One Big Beautiful Bill¹ may bring new tax considerations. Therefore, it is wise to discuss your unique circumstances with financial, tax, and estate professionals.

At Welch & Forbes, our tax professionals work alongside portfolio managers to help clients analyze the array of philanthropic options. Long-term client relationships contribute to our understanding of their intent and charitable goals over time. On occasion, Welch & Forbes portfolio managers may serve as trustees, depending on the client’s needs and the structure of the account. If you are interested in discussing your charitable giving goals, please contact us. We welcome the conversation.

^¹ The One Big Beautiful Bill Act is a U.S. federal statute signed into law on July 4, 2025 containing new tax and spending policies.

Disclosure: The information contained herein reflects the opinions of Welch & Forbes, LLC based on information believed to be reliable as of the date of publication. It is provided for educational purposes only and does not constitute investment, financial, tax, or legal advice. It is not a representation – expressed or implied – as to its accuracy, completeness, or correctness. This communication does not constitute a recommendation or solicitation to purchase or sell any securities or investment services.

Welch & Forbes, LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

Any strategies or investments referenced may not be suitable for all investors and past performance is not indicative of future results. All investing involves risk, including possible loss of principal.

Readers should not infer or assume that any strategies or services described were or will be profitable or suitable for their individual objectives, financial situation, or needs. The implementation of any financial strategy should only be undertaken in consultation with your attorney, tax advisor and investment advisor.