At Tavola Group, we often talk with clients about ways to give back while also managing their tax obligations. One strategy that can benefit both you and your favorite causes is charitable giving. Not only does giving to charities support meaningful work, but it can also provide tax advantages when done strategically. In this article, we’ll walk through how charitable giving can lower your taxes and share practical tips to maximize your impact.

 

Understanding Charitable Deductions

When you make a donation to a qualified charitable organization, the IRS allows you to deduct the value of that gift from your taxable income if you itemize deductions. This means charitable giving can directly reduce the amount of income the IRS taxes, helping you keep more of your hard-earned money.

It’s important to note that only contributions to organizations recognized as tax-exempt under IRS rules qualify. This includes most nonprofit organizations, religious institutions, and certain educational or healthcare entities.

 

Cash Donations

Cash contributions are the simplest form of charitable giving. You can donate by check, credit card, wire transfer, or through online platforms. Generally, you can deduct up to 60% of your adjusted gross income (AGI) for cash contributions to qualified charities. Any amount that exceeds the limit may be carried forward for up to five years.

Always keep proper records, receipts, bank statements, or written acknowledgment from the charity, as these are required to substantiate your deduction if the IRS asks for documentation.

 

Non-Cash Donations

Non-cash gifts can also provide significant tax benefits. The IRS allows you to deduct the fair market value (FMV) of donated property, which is generally what it could sell for on the open market. Examples include:

• Clothing, furniture, and household goods
• Vehicles
• Artwork or collectibles
• Real estate or other high-value assets

For donations of property valued over $500, you must complete IRS Form 8283. If the value exceeds $5,000 (other than publicly traded securities), a qualified appraisal is required.

Be mindful of deduction limits: for gifts of appreciated property held more than one year, deductions are generally capped at 30% of AGI, with a 5-year carryforward allowed.

 

Donor-Advised Funds (DAFs)

For investors and business owners, a donor-advised fund (DAF) can be one of the most powerful charitable giving strategies—especially when donating highly appreciated non-cash assets such as long-held stock, real estate, or business interests.

Here’s how it works:

1. Open a DAF with a sponsoring organization (such as Fidelity Charitable, Schwab Charitable, or a community foundation).
2. Contribute the appreciated asset directly to the DAF, without selling it first.
3. Receive an immediate charitable deduction for the asset’s fair market value (if held more than one year).
4. For appreciated assets, the deduction is generally limited to 30% of AGI; for cash, up to 60% of AGI. Any unused deduction may be carried forward up to five years.
5. The sponsoring organization can sell the asset tax-free or hold it indefinitely.
6. Over time, you recommend grants from the DAF to qualified charities of your choice.
   

The primary benefits are twofold:

• You avoid paying capital gains tax on the donated asset.
• You secure a charitable deduction for its FMV, within IRS limits.
  

DAFs provide flexibility, allowing you to separate the timing of the tax deduction from the timing of the actual charitable grants.

 

Bunching Contributions

Another effective strategy is “bunching” contributions. Instead of donating smaller amounts every year, you combine multiple years’ worth of donations into a single tax year. This can help you exceed the standard deduction threshold, making itemizing worthwhile and producing greater tax savings.

 

Charitable Giving and Retirement Accounts

For clients aged 70½ and older, charitable giving from an IRA can be particularly advantageous. With a Qualified Charitable Distribution (QCD), you can transfer up to $100,000 per year directly from your IRA to a qualified charity.

A QCD counts toward your required minimum distribution (RMD) but is excluded from taxable income—a significant benefit, especially for retirees who do not itemize deductions or want to reduce their taxable income.

 

Recordkeeping Is Key

Regardless of the type of donation, documentation is critical. Always retain:

• Receipts or acknowledgment letters for cash gifts
• Bank or credit card statements
• Form 8283 for non-cash gifts over $500
• Professional appraisals for certain high-value property donations
  

Proper records ensure compliance and protect your deduction if the IRS requests substantiation.

 

Timing Matters

When planning charitable contributions, timing can affect your tax savings. Donations made by December 31st count for that tax year. Planning ahead, especially if you’re considering bunching contributions, funding a DAF, or making a QCD, can maximize your benefit while aligning with your philanthropic goals.

 

Why Work with Tavola Group?

Charitable giving is more than generosity, it can also be a smart part of your overall tax strategy. With the right approach, you can support meaningful causes while reducing your tax liability. Tools like donor-advised funds, Qualified Charitable Distributions, and strategic bunching allow you to maximize deductions and make your giving more impactful.

At Tavola Group, we help clients integrate charitable giving into their broader tax and financial plans. If you’d like guidance tailored to your situation, book a free tax planning consultation with our team. Together, we’ll create a strategy that aligns your philanthropic goals with your financial future.