Each year around this time, our team sees an uptick in requests from clients who are looking to make a charitable gift before the end of the year.

While it’s not uncommon for our clients to donate throughout the year, the holidays tend to bring out a sense of giving in people, and since donations must be in by December 31 to qualify for a tax deduction the following spring, there is often little time left to determine the most efficient way to make the donation.

According to recent studies, approximately 72 percent of all charitable giving within the U.S. is made by individuals, and around 25 percent or more of all annual giving occurs during the winter holidays. In addition, an estimated 43 percent of higher-income donors (households earning more than $200,000) increase their charitable donations during the holidays.

As a comprehensive wealth management firm, we strive to help people utilize their wealth in the most effective ways possible. And while we always encourage our clients to pursue their philanthropic goals, we also want to make sure they’re donating in a tax-advantaged manner. So, before you write that check this year, take a look at the tips we’ve mapped out below to help you give back wisely during the holiday season.

Donate appreciated securities

The most tax-efficient way to make a charitable gift to an organization, is to donate from appreciated stocks, or other assets. This is typically the first option we look into for clients, because it yields a dual benefit to the donor. Using this method, the donor is able to receive a charitable income tax deduction, while also avoiding income tax on the appreciation within the asset.

Utilize IRA distributions

If a client is lacking appreciated assets, we may recommend that they utilize a portion of their minimum IRA distribution to fund a charitable gift (providing they haven’t already taken the required minimum distribution from their IRA for the year). Although they will not receive the charitable tax deduction, this method allows donors to avoid picking up the required minimum distribution on his or her income tax return. So, essentially, the gift becomes a tax-free contribution.

Sell depreciated securities and give cash

If the first two options are off the table, and the client is holding securities with losses, we sometimes recommend selling the client’s capital losses to free up additional cash for a donation. That way, the client has the benefit of utilizing those losses to offset capital gains tax and other income on their return, while also satisfying their desire to give to charity.

Consider future gifts and connect with a wealth manager

On certain occasions, we may recommend advance funding charitable gifting efforts using a donor-advised fund to accelerate the tax deduction without sacrificing the donation.

For instance, perhaps a client is interested in setting up an annual gifting strategy for the future, but is not sure which charity they will want to donate to in the years ahead. Or maybe a client who is in a lower tax bracket, but anticipates a large income bump midyear, is interested in donating to charity when they have additional funds to do so.

In these situations, a donor-advised fund allows the client to make a gift, get the tax deduction in the year of the gift, and then decide how they want to allocate the donated money to various charities in the future.

The donor-advised fund might be particularly advantageous this year, given the the impending transfer of presidential power in the U.S. While we can’t predict exactly what the new year will bring, the proposed tax reforms will lower rates if enacted. For that reason, it might make sense for some donors to advance fund this year to get the better deduction.

Looking to set up an annual gifting strategy? Click here to contact us today.


Chris Roe, CPA/PFS

Partner and Managing Director

Hall of