Tax-Efficient Charitable Giving

Charitable-giving planning considers your goals and the potential tax effects of different gifts. Brett Henderson at SWE90 can help evaluate financial-planning considerations. Coordinate tax decisions with your tax advisor.

Key Takeaways

Appreciated gifts: Evaluate eligibility, valuation and deduction limits.
Bunching: Compare gift timing with your deduction circumstances.
QCDs: Eligible IRA transfers at age 70 1/2 or older, subject to rules.
Donor-advised funds: Contributions are irrevocable; sponsor control applies.

Overview

Charitable-giving choices can affect both your charitable goals and tax outcomes. Compare cash gifts, eligible property gifts and IRA distributions while considering costs, deduction limits and your circumstances.

Key Points

Appreciated gifts: Evaluate eligibility, valuation and deduction limits.
Bunching: Compare gift timing with your deduction circumstances.
QCDs: Eligible IRA transfers at age 70 1/2 or older, subject to rules.
Donor-advised funds: Contributions are irrevocable; sponsor control applies.

Steps to Take

1. Step 1: Assess your situation
2. Step 2: Research options
3. Step 3: Consult Brett Henderson
4. Step 4: Implement your strategy
5. Step 5: Monitor progress

Frequently Asked Questions

What's the most tax-efficient way to give?

The appropriate gift depends on your goals, assets and tax situation. See the deduction rules on page 4.

What is a Qualified Charitable Distribution?

For 2026, eligible IRA owners age 70 1/2 or older may exclude up to $111,000 per person in qualifying direct charitable distributions. A QCD can count toward an RMD. See eligibility and deduction restrictions on page 4.

QCD source: https://www.irs.gov/irb/2025-49_IRB (Notice 2025-67)

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By Brett R. Henderson, CIMA®, CPFA®, CRPS®, CEPA®, AIF®, CLU®, BFA™ — Fiduciary Advisor at SWE90.

Securities offered through Vanderbilt Securities, LLC. Member FINRA, SIPC.

Tax planning is not just about reducing your current tax bill—it can also help optimize your lifetime tax burden. Strategies such as Roth conversions, withdrawal sequencing, and tax-loss harvesting may help reduce taxes and preserve more of your retirement savings, depending on your individual circumstances.

How Do Different Strategies Compare?

Account considerations depend on individual circumstances Traditional IRA/401(k): The taxable portion of distributions is ordinary income. RMD start dates depend on birth year and account rules; some employer-plan exceptions apply. Other account types are discussed on the next page.

Account considerations (continued) Roth IRA/401(k): Qualified distributions are tax-free. Original owners have no lifetime RMDs; beneficiary rules differ.

Taxable brokerage: Tax treatment depends on income type, holding period and applicable rules.

HSA: Qualified medical expense withdrawals are tax-free; other withdrawals may be taxable. There is no single withdrawal order that is best for every household.

What Tax Planning Actions Should You Prioritize?

Effective tax planning requires proactive strategies implemented throughout the year, not just during tax season. Consider these priority actions:

Review your withholding and estimated payments: The IRS Tax Withholding Estimator can help you determine if your current withholding is appropriate to avoid surprises at tax time.
Evaluate Roth conversions: The taxable portion increases income in the conversion year. Future qualified Roth distributions are tax-free subject to holding-period and age or other conditions. Compare current and future effects with your tax advisor; savings are not assured.
Harvest tax losses: Tax-loss harvesting can be an effective strategy for potentially reducing taxes on investment gains in taxable accounts. Review netting and wash-sale restrictions with your tax advisor.
Review retirement contributions: Eligibility and tax treatment differ by account type. Traditional IRA deductibility can be limited; Roth contributions do not create a current income-tax deduction.
Plan charitable giving: Evaluate gift timing and donor-advised funds alongside deduction limits, costs, sponsor control and your charitable goals. Tax benefits depend on your circumstances.

Effective tax planning can help individuals and families identify opportunities to reduce their tax burden and improve after-tax outcomes. Coordinate implementation with your tax advisor.

How to Create a Tax-Efficient Retirement Plan: Step-by-Step

Implementing a tax-smart strategy requires a systematic approach:

1. Step 1: Map your income sources. Identify all current and projected retirement income streams, including Social Security, pensions, 401(k)/IRA distributions, and taxable investment income.
2. Step 2: Estimate your future tax bracket. Project your retirement income to determine which federal and state tax brackets you will likely fall into, using resources from the IRS.
3. Step 3: Evaluate Roth conversions. The taxable portion increases current-year income. Compare current and future tax effects with your tax advisor; savings depend on individual circumstances.
4. Step 4: Evaluate tax-loss harvesting. In taxable accounts, eligible losses may offset gains under tax rules. Review wash-sale restrictions with your tax advisor.
5. Step 5: Plan withdrawal sequencing. Compare account types, tax brackets, required distributions and spending needs. The appropriate sequence depends on your circumstances.
6. Step 6: Evaluate charitable giving. Eligible IRA owners age 70 1/2 or older may make qualifying direct charitable distributions, subject to rules and limits; these can count toward an RMD.
7. Step 7: Review annually with financial and tax advisors. Revisit law changes, income, account balances and charitable goals to evaluate available planning opportunities.

Tax-efficient retirement planning may help reduce the taxes you pay throughout retirement, depending on your individual circumstances. Book your tax strategy session.

Charitable-giving rules for 2026 A qualifying direct gift of long-term appreciated securities may avoid realization of a capital gain by the donor. A fair-market-value deduction can be available, subject to recipient, property, substantiation and income limits; it is not automatic. Cash gifts to qualifying public charities are generally subject to a 60% adjusted-gross-income (AGI) limit. A 30% AGI limit generally applies to long-term capital-gain property gifts to these charities; other limits and exceptions apply. Beginning in 2026, itemizers generally deduct charitable gifts only above a 0.5% AGI floor. Nonitemizers may deduct eligible cash gifts up to $1,000 ($2,000 jointly), with restrictions. A QCD must transfer directly from an eligible IRA to an eligible charity. Donor-advised funds and supporting organizations do not qualify. Excluded QCD amounts cannot also be claimed as charitable deductions. Deductible IRA contributions after age 70 1/2 may reduce the exclusion; consult your tax advisor. Donor-advised fund sponsors retain legal control of contributed assets; donor recommendations are advisory. Evaluate fees and the irrevocable nature of a gift.