When (and How) to Give: Tax-Smart Charitable Strategies for Wealth Builders

Giving Back Is Powerful – But Doing It Strategically Can Also Reduce Your Tax Bill

If you’re in a season of growth, generosity often comes naturally. Maybe you’ve reached a level of financial success where you want to give back to causes you care about. Or maybe giving has always been part of your values and now, you want to make your giving more efficient and impactful.

But here’s the truth most financial professionals don’t talk about: how you give matters just as much as what you give.

Done right, charitable giving can do more than support meaningful work in the world – it can also help you reduce your tax burden, diversify your investments, and build a legacy aligned with your values.

In this guide, we’ll walk through how to give with intention, structure, and strategy – so your generosity works for the people and causes you love, and for your long-term financial picture.

The Common Mistake: Writing Checks Without a Plan

Most high-income earners give in one of two ways:

1. Ad hoc donations (a few hundred or thousand here and there throughout the year)
2. One-time end-of-year contributions made to offset taxes or respond to a nonprofit’s request

While both are generous, they’re rarely strategic. Without a plan, you might be missing out on major tax benefits and failing to maximize the impact of your giving.

In fact, many of our clients are surprised to learn that writing a check is usually the least tax-efficient way to give.

Instead, by donating appreciated stock or using tools like donor-advised funds (DAFs), you can give more to charity and pay less to the IRS at the same time.

Strategic Giving Moves: How to Give Smarter

Whether you’re focused on tax planning, legacy building, or both – here are some smart charitable strategies to consider:

1. Donate Appreciated Stock Instead of Cash

If you have stocks, ETFs, or mutual funds that have appreciated in value, donating them directly to a qualified charity allows you to:

• Avoid paying capital gains tax
• Deduct the full fair market value of the asset
• Reduce your concentrated stock position without triggering a tax event

This move is especially powerful if you’ve held the asset for over a year and are sitting on significant unrealized gains – common for tech professionals or equity-heavy investors.

2. Use a Donor-Advised Fund (DAF)

Think of a DAF as your personal charitable giving account. You make contributions (cash or appreciated assets), take an immediate tax deduction, and then recommend grants to your favorite nonprofits over time.

Benefits include:

• Flexibility: contribute in a high-income year and distribute over several years
• Simplicity: consolidate all your charitable giving in one place
• Investment growth: your donation can grow tax-free inside the DAF before being granted out

This is one of the most powerful tools for high-income professionals looking to front-load giving and reduce taxable income in a peak year.

3. Bunch Charitable Donations to Maximize Deductions

The 2017 tax law increased the standard deduction, making it harder for many people to itemize deductions every year.

“Bunching” is a strategy where you combine multiple years of donations into one year to exceed the standard deduction threshold and receive a larger tax benefit – especially powerful when used with a DAF.

4. Create a Legacy Plan for Giving

If charitable giving is core to your values, consider incorporating it into your estate plan:

• Name charities as beneficiaries of IRAs (nonprofits don’t pay income tax)
• Set up a charitable remainder trust (CRT) or charitable lead trust (CLT)
• Include giving goals in your family wealth strategy

These approaches clarify your values, pass them on and help your estate avoid unnecessary taxes.

Choosing the Right Strategy for You

Every giving strategy has trade-offs. Here’s a quick comparison:

The best approach depends on your income, assets, goals, and values. Often, the most effective strategy is a combination of several of these tools.

FAQs

What’s the most tax-efficient way to make a donation?
Donating long-term appreciated stock is one of the most tax-efficient ways to give. You avoid capital gains tax and still get a deduction for the full market value.

How does a donor-advised fund work?
You contribute cash or assets to a sponsoring organization, receive an immediate tax deduction, and then recommend grants to your favorite nonprofits over time.

Can I donate private business interests or real estate?
Yes, with proper planning. Gifting non-publicly traded assets like business interests or real estate can offer large deductions, but they require legal and tax structuring.

Can charitable giving reduce my income tax?
Yes – if you itemize deductions and follow IRS rules, your charitable donations can reduce your taxable income, especially in high-earning years.

Can I name a charity as a beneficiary of my IRA?
Yes, and it’s a smart move. Charities don’t pay income tax, so naming them as beneficiaries of pre-tax accounts (like IRAs) can avoid taxes your heirs would otherwise pay.

Final Takeaway: Align Generosity with Strategy

Giving is one of the most meaningful things you can do with your wealth. But giving with a plan? That’s how you create real impact and optimize your financial life.

Whether you’re nearing a liquidity event, managing a high-income year, or simply ready to elevate your giving strategy, we’re here to help you give with purpose and precision.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A. an affiliate of LPL Financial.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through The Wealth Consulting group, a registered investment advisor. The Wealth Consulting group, WCG Wealth Advisors and Truly Aligned, INC are separate entities from LPL Financial.