Philanthropy and taxes: How giving impacts your return

Did you know that philanthropic giving not only benefits the charitable organization, but also may be associated with improvements in your personal health and well-being? Studies show that charitable giving may contribute to positive feelings of connection, purpose or well-being.¹

Secondary to all of these benefits, donating to charity may also have a positive impact on your tax return. Following are five strategies that may help enhance your philanthropic impact while also potentially reducing your tax exposure.

1. Maximize your donation with appreciated assets

While cash is the most common form of charitable donation, you may be able to increase both your impact and your potential tax savings by making an in-kind donation of appreciated assets, such as stocks, bonds or other securities.

As long as you’ve held the assets for at least a year, you can directly transfer them to a charitable organization without incurring capital gains tax on the appreciated portion, subject to IRS rules and your specific circumstances. Because charities are tax exempt, the organization can then sell the security and receive its full market value without being subject to capital gains tax.

For a hypothetical example, let’s say you have a plan to donate $5,000 to your favorite charity, and you decide to sell some stock to fund this donation. The capital gains tax you have to pay on that could be around $800, leaving $4,200 as a charitable donation. You could then claim a $4,200 charitable deduction on your itemized tax return. ²

In contrast, what would happen if, instead of selling the stock, you transferred it in-kind directly to the charity? You would avoid triggering a taxable event and owe nothing on the transaction. The charity would receive the shares and sell them for their current market value of $5,000 without paying capital gains tax.

As a result, you could claim a $5,000 charitable deduction and the charity would receive an extra $800 to support its mission. This approach may provide benefits for both you and the charity, depending on your tax situation.

2. “Bunch” your donations for maximum tax efficiency

If your income doesn’t meet the threshold for filing an itemized tax return, you could miss out on an opportunity to claim a tax deduction for your charitable donations.

Fortunately, the IRS allows taxpayers to “bunch” several years of charitable contributions into a single year. Doing so may push your eligible deductions above the standard filing threshold, which may allow you to file an itemized tax return and claim a charitable deduction.

For example, if you normally donate $5,000 per year to charities, it may make sense to bunch five-years’ worth of these donations and contribute $25,000 once every five years. Doing so may allow you to file an itemized return and receive a tax deduction in the years you make the contributions.

If you wish to continue supporting your favorite charities on an annual basis, consider donating your “bunched” assets to a donor-advised fund (DAF). This allows you to access an immediate tax deduction during your itemized filing years, while having the flexibility to allocate your charitable donations over time.

3. Establish a donor-advised fund (DAF)

A DAF is a charitable-giving vehicle that allows you to make a charitable contribution, receive a tax deduction in the current year (assuming you file an itemized tax return), then allocate funds to various charities over time.

DAFs accept a wide range of assets, including cash, appreciated securities and real estate. The eligible tax deduction varies based on the type of asset contributed (check with your CPA or advisor about current limitations).

Funding a DAF may be an effective strategy during years in which your income is higher than normal, such as when you receive a large bonus, inheritance, equity vesting, proceeds from business sale, etc., as the contribution amount can help offset some of this taxable income.

In addition to the potential tax benefits, DAFs provide an opportunity to pass along a legacy of charitable giving to future generations. Because there is no deadline for when the assets in a DAF must be distributed, funds can accumulate for many years, which means that some sponsoring organizations may allow later generations to be named as successors, depending on their policies.

4. Make a direct transfer of your RMD

Many retirees may be surprised to discover that they could actually fall into a higher income tax bracket later in retirement, thanks to the additional income tax exposure associated with their annual required minimum distribution (RMD). The additional income of an RMD means that some retirees may also face higher taxes on their Social Security benefits, as well as increased Medicare premiums.

To help manage or avoid this additional tax exposure, you may want to consider a qualified charitable distribution (QCD), which is a direct transfer of tax-deferred retirement savings from your account to a qualified charitable organization.

In 2026, the IRS allows individuals age 70 ½ and older to directly contribute up to $111,000 (up from $108,000 in 2025) of tax-deferred retirement assets to charity. There are a few important requirements that must be met for the donation to qualify as a QCD:

• The donation must be issued from the retirement account’s trustee directly to the charitable organization. If you take possession of the assets at any point, the transaction will not qualify.
• The donation must be received by the charity prior to December 31 to count in the current tax year.
• The receiving charity must be a 501(c)(3) organization. Donor-advised funds and private foundations are not eligible for QCDs.

5. Access ongoing income while optimizing your charitable donation

Charitable trusts provide an opportunity to support the causes that are important to you, while also creating a potential income stream for yourself or a loved one. There are two main types of charitable trusts.

• Charitable remainder trust (CRT): A CRT allows you to transfer assets to the trust and receive regular income (for you or a named beneficiary) for a designated period of time. When the trust term ends (perhaps at your death), the remaining assets in the trust are donated to your named charity.
• Charitable lead trust (CLT): A CLT is, essentially, a CRT in reverse. The CLT starts by making regular payments to a charity for a designated period of time. When the time period ends, any assets remaining in the trust are distributed to you, your named heirs or other noncharitable beneficiaries.

How Mariner supports your charitable giving goals

Each of the strategies noted above may help support your charitable impact while potentially reducing your tax exposure. However, the right charitable giving strategy for you depends on your financial goals, risks, time horizon, charitable giving priorities and more.

As you navigate the challenges of tax-efficient charitable giving, it helps to have a team in your corner to help ensure your decisions are in line with your long-term goals and overall financial plan.

At Mariner, we offer personalized solutions designed to help you manage the complexities of tax planning and wealth management. Your wealth advisor can work with you to develop a tax-efficient charitable gifting strategy that supports the charitable organizations you hold dear, as well as your family and your legacy.

¹sadagaat-usa.org/blog/the-power-of-giving-why-you-should-donate-to-charity/
²This hypothetical scenario assumes that you’ve held the stock for over a year, and your cost basis is $1,000. When you sell the stock for $5,000, you trigger capital gains tax on the $4,000 in investment growth. At a 20% rate, you would pay $800 in taxes, leaving $4,200 as a charitable donation.

Actual results will vary based on your personal circumstances. Keep in mind to receive full tax benefits for donating appreciated stock, the stock must have been held for over one year, donated to a qualified public charity, and meet AGI deduction limits and itemization requirements. Proper documentation, including a written acknowledgment from the charity and filing IRS Form 8283, is also necessary. Additional information is available on the IRS website.

This material is provided for informational and educational purposes only. It does not consider any individual or personal financial, legal, or tax circumstances. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind. Where specific advice is necessary or appropriate, individuals should contact their professional tax, legal, and investment advisors or other professionals regarding their circumstances and needs.

Tax strategies described herein may not be appropriate in every case and tax laws are subject to change at any time. Individual results will vary, and the strategies discussed are not guaranteed to achieve any specific tax or financial outcome. Tax and charitable giving strategies should be evaluated with a qualified tax professional to understand their impact on your personal tax situation.

Any opinion expressed herein is subject to change without notice. The information provided herein is believed to be reliable, but we do not guarantee accuracy, timeliness, or completeness. It is provided “as is” without any express or implied warranties.

There is no assurance that any investment, plan, or strategy will be successful. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results, and nothing herein should be interpreted as an indication of future performance.

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