What are the tax benefits of charitable giving?
To deduct charitable contributions, you generally must itemize deductions rather than take the standard deduction.
For 2025, the standard deduction is:
$15,000 (single)
$30,000 (married filing jointly)
Here are a few strategies to maximize the tax benefit of charitable giving.
💸 Donor-Advised Fund (DAF)
A DAF is like a charitable investment account. You contribute assets now, get an immediate tax deduction of the full fair-market value of the asset, up to 30% of your adjusted gross income, and distribute the funds to charities over time.
Key Benefits:
Immediate deduction: Deduct in the year of contribution, not when the grant is made.
Bunching strategy: Combine several years' worth of donations into one tax year to exceed the standard deduction threshold and itemize.
Donations of appreciated assets: Avoid capital gains tax and get a full deduction for fair market value.
Example:
You donate $50,000 in appreciated stock to a DAF in 2025.
You claim a $50,000 charitable deduction (assuming you itemize).You grant $10,000/year to your favorite charities from the DAF over 5 years.
Modeling DAF contributions In the Boldin Planner
The planner does not have a DAF account type, and when you donate to a DAF, the funds are no longer your asset. You can, though, account for DAF contributions in the planner using the Detailed Budgeter as long as your contributions exceed the standard deduction. The Planner will compare your standard deduction and your deductible contributions on an annual basis and apply the one that’s most beneficial to you.
💵 Gifts of Cash Above the Standard Deduction
If you don’t itemize, cash donations are not deductible. However:
If you bunch cash donations into a single year to exceed the standard deduction, you can claim the charitable deduction that year.
Deduction limit: Cash gifts to public charities are deductible up to 60% of AGI.
Strategy:
In high-income years, donate more to exceed the standard deduction threshold and itemize.
Consider combining this with a DAF for flexibility.
Modeling cash contributions In the Boldin Planner
You can account for cash contributions in the planner using the Detailed Budgeter as long as your contributions exceed the standard deduction. The Planner will compare your standard deduction and your deductible contributions on an annual basis and apply the one that’s most beneficial to you.
🧓 Qualified Charitable Distributions (QCDs)
Available only if you’re 70½ or older and have a traditional IRA.
Key Features:
Send up to $105,000/year (2025 limit) directly from your IRA to charity.
Excluded from taxable income (unlike regular IRA withdrawals).
Counts toward your Required Minimum Distribution (RMD).
Why Use QCDs?
Great for those who don’t itemize (you still get the tax benefit).
Reduces AGI, which can lower:
Income Tax
Medicare premiums (IRMAA)
Taxation of Social Security
Modeling QCDs In the Boldin Planner
Add a Deductible Disbursement in January. Only Deductible Disbursements entered in January will reduce the RMD. If there is residual RMD required, the planner will satisfy the requirement in December.
Note: Insights > taxes > Gross taxable income by source chart will include the RMD full amount and not the partial amount. However the net taxable income will not include the Deductible Disbursement.
