High-Net-Worth Charitable Giving: Maximize Impact, Minimize Taxes
Episode 8
High-Net-Worth Charitable Giving: Maximize Impact, Minimize Taxes
Published on October 1st, 2025
In Episode 8 of Retirement Tax Matters we dive into optimizing your charitable giving, revealing why writing a check from you checking account is likely costing high-net-worth retirees significant tax dollars. You'll learn about Qualified Charitable Distributions (QCDs) from Traditional IRAs, which allow you to donate up to $108,000 tax-free directly from your IRA (bypassing RMD taxes), versus utilizing Donor-Advised Funds (DAFs) for highly appreciated assets like stocks. We illustrate how donating appreciated securities to a DAF can help you avoid up to a 23.8% capital gains and Net Investment Income tax on your gains, simultaneously providing a charitable deduction and offering flexible timing for your charitable giving. Discover how to strategically use DAFs to create additional Roth conversion space, potentially for example, dropping from a 32% to a 24% tax bracket in a given year, and even leverage DAFs for anonymous giving. We also break down key updates from OBBBA starting in 2026, including the 0.5% AGI floor for itemized deductions and the new $1,000 Individual / $2,000 Married Filing Jointly deduction for non-itemizers, ensuring your giving strategy remains tax-efficient in 2026 and beyond. This is essential listening for maximizing impact and minimizing your tax burden.
Corrections: In the video, I said the QCD limit was $102,000. It’s actually $108,000 per person in 2025.
Key Tax Planning Questions
Click Below To See The Answer
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For many retirees, one of the most tax-efficient ways to donate from your IRA is through a Qualified Charitable Distribution (QCD). A QCD allows you to directly transfer funds from your Traditional IRA to an qualified charitable organization. This money, which has grown tax-deferred, then goes to the charity tax-free and does not appear as taxable income on your return. One of the best features of QCDs is that it can also count towards your Required Minimum Distribution (RMD)!
It's important to note the specific rules for QCDs: you must be at least 70½ years old to initiate one, and there is an annual limit of $108,000 per person in 2025. While Donor-Advised Funds (DAFs) are excellent for appreciated brokerage accounts, the QCD is generally the charitable contribution method of choice when using Traditional IRA funds.
Finally, a crucial point: always inform your tax preparer if you've done a QCD. Your 1099-R form typically won't distinguish between a regular taxable IRA distribution and a QCD. Failing to notify your tax professional could result in that distribution being incorrectly reported as taxable income, leading to you potentially being taxed twice on the same funds.
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This area often presents significant opportunities, but also some confusion for high-net-worth retirees. While Qualified Charitable Distributions (QCDs) are straightforward for Traditional IRAs, the process for donating highly appreciated securities from a brokerage account offers distinct advantages for avoiding capital gains tax.
The core benefit is twofold:
Fair Market Value Deduction: You can claim a charitable deduction for the full fair market value of the appreciated stock on the day you donate it (subject to Adjusted Gross Income limitations explained below).
Capital Gains Tax Avoidance: Crucially, you avoid paying any capital gains tax on the appreciation of the donated shares. For HNW retirees, this can mean saving 15% to 23.8% on the long-term capital gains you would have otherwise realized.
While many large charitable organizations can accept securities directly, most retirees find the flexibility and ease of a Donor-Advised Fund (DAF) to be highly beneficial. A DAF allows you to transfer appreciated securities into a charitable account, immediately triggering your charitable deduction and avoiding capital gains tax. You then have the flexibility to distribute funds to various charities over time, at your own pace, and can even choose to give anonymously. For example, some clients find it convenient to have their DAF with the same custodian as their investment accounts (e.g., Schwab and DAFgiving360), making transfers seamless and charity distributions just a few clicks away.
A consideration for larger charitable contributions: When donating appreciated non-cash assets (like stock) held for more than one year, the deduction is generally limited to 30% of your Adjusted Gross Income (AGI). This differs from cash gifts, which have a higher AGI limit of 60%. If your charitable deduction for securities exceeds this 30% AGI limit in a given tax year, the IRS permits a carryover for up to five subsequent tax years. This feature is particularly valuable for HNW individuals who may want to make a substantial donation in one year (e.g., after a business sale or large liquidity event) but utilize the deduction over several years.
Beyond direct donations, DAFs facilitate sophisticated strategies. Consider a scenario where you hold a large block of stock with significant unrealized long-term capital gains, but you're still actively saving or contributing to your brokerage account. Over multiple years, you can strategically donate appreciated shares to your DAF while simultaneously replacing those donated shares with contributions from savings/earnings. This approach can effectively neutralize large unrealized capital gains over time, build up your cost basis in the replacement assets, and significantly lower your overall tax burden, all while fulfilling your giving goals.
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This is where proactive planning can create synergy between your tax strategy, investment plan, and legacy goals. It all begins with a review of your previous year's tax return and a detailed tax projection for your current year. This process helps identify where your income might land, how much room you have within your current ordinary income tax bracket, and how much long-term capital gain income you can realize before jumping from the 15% to the 20% capital gains tax rate.
Consider this inspired case I recently worked on: a couple knew they wanted to initiate significant charitable giving but hadn't yet finalized their specific charitable organizations. Through a tax projection exercise, we estimated their current ordinary income tax bracket and determined their Adjusted Gross Income (AGI) for the year. This allowed us to calculate how much they could contribute to a Donor-Advised Fund (DAF) to maximize the 30% AGI deduction limit for appreciated securities. In this instance, a substantial DAF contribution not only provided the charitable deduction but also strategically lowered their taxable income, actually dropping them into the 12% tax bracket. This created a great opportunity: we then executed a Roth conversion, with a significant portion of that conversion being taxed at only 12%. This example highlights how coordinating your charitable giving with other tax-planning levers can dramatically reduce your current and future tax liabilities.
Even if you don't hold highly appreciated securities in a taxable account, a similar planning approach applies. Start with that current year tax projection to understand your income landscape. From there, you might consider a Qualified Charitable Distribution (QCD) from your Traditional IRA. If the QCD keeps your taxable income lower, it can open up valuable space to perform a Roth conversion up to the top of your now-lower tax bracket.
Every individual and couple presents a unique puzzle, but by paying close attention year by year, these integrated strategies can make a big difference in minimizing taxes and making your giving more effective.
Full Episode Transcript
Adam: Good morning, and welcome to Retirement Tax Matters. You've got me, Adam Reed, and Garrett Crawford, a CFP, with us here. We love to talk about different advanced tax planning tips, tricks, and some education for high-net-worth retirees, as you guys probably already know if you've seen an episode before. Follow along on Apple Music, Spotify, YouTube—like, subscribe, all the different things you can do. Help us out and help us get in front of more people.
Garrett: Subscribe to every single platform out there. Turn on notifications, turn on text message.
Adam: We will blow up your phone. We love to interact with and educate other people about this space of high-net-worth retirees, thinking for the future, maybe at the end of your working years, or also kind of what to do now that you're there. Or maybe you're already into your retirement and looking for some fine tuning along the way. So, Garrett, how are we feeling today?
Garrett: I'm doing pretty good. I'm ready to hop into this.
Adam: Yeah, we got some fun stuff today. I think one of the things that's maybe surprised me being a younger guy in the industry is just how many people are charitably minded. There's a million different places where you can send your money and make an impact, especially for some of our high-net-worth retirees. And kind of the tagline for this today is, maximize your giving, minimize your taxes. There's also a lot of great opportunity to not only benefit others but to benefit yourself while you're giving. What are some things that are on your mind as you work with people who are charitably minded?
Garrett: I remember that catchall phrase, “your giving is tax deductible.” For the target demographic of who we're doing this Retirement Tax Matters platform for, higher net worth retirees, it's going to be impactful because a lot of you, if you do giving, are probably going to be itemizing your deductions. We want to talk about how we do giving and do giving better. Let's start with this: what's the main mistake that people are making when it comes to charitable giving? It's not universally true, but for many of you in retirement, you shouldn't just be writing a check to a charitable organization like you did your whole life.
Adam: My mom still balances her checkbook every month, and it always cracks me up. I'm like, just check your app online.
Garrett: So checks are ingrained in our mind. Let's remember where that money sitting in your bank account, that you write a check from, came from. It probably accumulated from a job where you paid taxes. Or maybe that money comes from an IRA withdrawal, but you had to pay taxes to get that money into your checking account. So all the money you give away from your checking account has been after-tax money. A few years ago, Congress made permanent something called a Qualified Charitable Distribution (QCD). If you're a retiree over age 70 and a half, you should strongly reconsider donating from your checking account. Instead, if you have a Traditional IRA, you should probably be giving from your IRA because the IRA money has not been taxed yet. You're avoiding taxes. I would say the biggest mistake right now for retirees is just defaulting to what they've done their whole life, which is writing a check to a charity. But if you're older than 70 and a half, stop, pause, reconsider.
Adam: That's a great point because these extra few percentage points, depending on how high net worth you are, writing a check that you paid 35% tax on is pretty substantial.
Garrett: That's a 32-35% difference in your giving. For a lot of our charitably inclined, high net worth retirees, that turns into a lot of money.
Adam: I think the QCDs and the Donor-Advised Funds (DAFs) are a good segue. When would you use one versus the other? What are they kind of tied to account-wise? Because I know there are some stipulations. They're not either/or, it's kind of both/and for a lot of people that have traditional money and some brokerage money. Give us a crash course.
Garrett: We're going to give a high level here. Most retirees who give a lot have probably heard of a QCD. A DAF is something you might have heard of, but this might be the very first time. DAFs are more complicated, but for our higher net worth clients with appreciated securities, they're a great tool and are becoming exponentially more popular. Let's start with the QCD because they're appropriate at different times. A QCD is for a retiree who wants to use Traditional IRA money—money that's never been taxed—to give to a charity. As long as you're 70 and a half, and as long as the check is mailed directly from your custodian to the charity, the QCD does a few things. It leaves your account tax-free, meaning it doesn't show up on your tax return. You don't pay taxes on it. The charity doesn't pay taxes. And the big bonus: a QCD can count towards your Required Minimum Distribution (RMD). We have a lot of clients, maybe your RMD is $60,000-$80,000, but you just don't need it all. If you do any charitable giving, use your RMD as a funding source instead of your checking account. For QCDs, there is a limit, I think it's $102,000 (correction $108,000) this year, going up by inflation. You can give up to that amount per year, and it can be an amazing way to not pay tax if you're at the 32-35% tax bracket. Almost everybody should be aware of that. Sometimes people take a standard deduction, but a QCD can still be a simplified way to give. The Donor-Advised Fund. Whereas the QCD is great for pre-tax Traditional IRAs, the DAF is really a great tool if you have an investment account—a brokerage account. I see these a lot with higher net worth people who bought shares 20 years ago and let them grow. Let's say you bought Apple stock for $100,000, and now it's worth half a million. If you sold all that Apple stock, you would pay long-term capital gains on the $400,000 difference. For a high net worth retiree, your long-term capital gains rate is probably 15% or 20%. Plus, many clients whose income is over $250,000 also get hit with the net investment income tax, another 3.8%. So selling a highly appreciated security could mean a 23.8% long-term capital gains tax. A DAF enters here: you can donate this highly appreciated security to a charity. You get two things: a full charitable deduction up to the fair market value (with income limitations), and you avoid paying the 23.8% capital gains tax. Generally speaking, if you have highly appreciated securities you're not comfortable with and you do some giving, a DAF is a great way to rebalance, reduce risk, do some giving, and avoid long-term capital gains tax. It's just a win-win.
Adam: You also get some flexibility in the DAF as well, right? You can do a big chunk of that in one year and then choose how to spread that out over the next few years.
Garrett: That's the other big benefit of a DAF. You can take that charitable deduction in this calendar year, but you don't have to give it all away. I really like opening up a DAF at Schwab, so clients can have a DAF and their normal investment account at the same custodian. Moving shares to the DAF triggers the charitable deduction, but you have no requirement to send that money out to the charity yet. So if you know you want to give away money but don't know who yet, or if you sold a business and want to make a large contribution but not divvy it all out in one year, you can hold those funds in the DAF and distribute them at your desired cadence.
Adam: When we're thinking about DAFs, QCDs, how does that roll into or play into what we're doing year by year to help our high net worth clients make good decisions on how to maximize their giving and minimize their taxes?
Garrett: The catchy headline here is: what if you could give money to charity but also increase the amount you can get into Roth IRAs? Here's how that works. I had a client last year where this was appealing. They wanted to set up a DAF with highly appreciated securities, but also liked creating more space for a Roth conversion. We moved $100,000 of appreciated securities to a DAF, which created about $70,000 extra dollars of Roth conversion space at the 22% tax bracket before they hopped up to 24%. We were able to get more money into the Roth IRA via Roth conversion, doing something they wanted to do—give money to charity—and we capitalized on that charitable deduction. You can leverage DAFs to rebalance and reduce risk in your investment account, pay less tax, and if strategic, hop down into a lower tax bracket. If you're in the 32% tax bracket, you might create a large tax deduction, go down to 24%, and create space for a sizable Roth conversion in one year. Most people really don't know how DAFs work. It's a matter of looking at your unique situation to maximize that.
Adam: It's one of those things, like you always say, it's hard until it's not. DAFs feel like so much to understand, but once you can kind of boil it down, it seems like a great opportunity if you're charitably inclined to help other people and also benefit yourself. It's a win-win.
Garrett: I was just with a client this week, drawing it all on the board. I said, "I know this is complicated, but as soon as you open that DAF and transfer securities, it's going to click." One other great thing about DAFs: if you've ever given money to charities, you can sometimes be harassed year after year. A DAF also allows you to give anonymously. A lot of these charities are already built into systems like Schwab, and you can send a check without your name. You can support a cause without signing up for an eternal donor list. For many clients, that has real value. One thing to mention: there are AGI limits. I think it's like a 30% of AGI limit for securities you donate, which is different than cash (I think 60% limit of AGI). If you give more than the limit, you get carryovers in future years. The higher your income—you sell a business one year, for example—your income will spike, which usually provides opportune times to maximize a DAF contribution.
Adam: The One Big Beautiful Bill Act was signed earlier this year. Is there anything in there that we need to be aware of moving into the end of 2025 and into 2026 concerning charitable giving and how it could impact our planning?
Garrett: So much going on, I almost forgot about the One Big Beautiful Bill. Here's what you need to know: There has been a cultural trend within Congress, where they're kind of coming after you—they would say the rich need to pay their fair share. That line in the sand has really been for a married filing jointly household above $400,000. If you're in that area, you've probably noticed you're in the crosshairs. The people most impacted are on the lower end of what they're defining as rich, say $400,000-$700,000 of income. There were two new laws in the One Big Beautiful Bill targeted at you. They sound kind of bad, but in the grand scheme, they won't change your charitable giving strategies much. The first is for some high net worth retirees: a 0.5% AGI floor limitation. Before you can itemize deductions, you have to get over half a percent of your income. For an income client over a million dollars, it was an extra $1,500 he wouldn't get to take. $1,500 is a lot of money, but for someone with that much income, it doesn't move the needle much. It's a law that feels like it has a lot of teeth, but when you run the numbers, it's not that big a deal. The other for high-income people: if you're in the 37% tax bracket or above, you'll be capped at taking a 35% charitable deduction. Not that many people are in the 37% bracket, but if you are, in 2026 and beyond, you'll only take a 35% deduction. The other rule that affects almost everybody else is actually kind of cool. Back in 2020, to encourage extra giving during the pandemic, they allowed people to add $300 of charitable giving on top of the standard deduction. That rule is back for 2026 and beyond, and it's a little higher. If you're single, you can deduct an additional $1,000 above the standard deduction; if married, it's $2,000. So, starting next year, if you do $2,000 worth of giving, you can deduct an additional $2,000 (even if you give $5,000, you'll only deduct $2,000). A cool change to encourage people to give a little more. It's a pretty technical topic, but a huge issue for the type of people we're helping. If you've never done a deep dive, you should, and stick around, because we're going to be talking about it more.
Adam: I think we covered a lot of ground today. Hang around. Check out our website, RetirementTaxMatters.com, it’s a place to submit a question if you want more clarity on a topic. If you're saying, "Hey, this donor-advised fund sounds interesting to me, but I didn't quite understand this," submit a question. Maybe we do an episode on it, maybe we respond to an email. But we're here. We want to educate people and help people feel more confident in their future, in their retirement planning, and decisions they're making coming down the pipe. So, appreciate you guys following along with us. I'm Adam. This is Garrett, our CFP, and I appreciate you guys for tuning into Retirement Tax Matters.
Garrett: All right. See you next time.