Charitable Giving Strategies

You’ve been writing $500 checks to your favorite charities every year because it feels good to give back. But you’re also sitting on $100,000 of Apple stock you bought 15 years ago that’s up 600%. If you sell it, you’ll pay $15,000-20,000 in capital gains taxes. If you donate it, the charity gets the full $100,000 and you get a tax deduction—no capital gains tax at all.

Most Phoenix residents who want to support charities just write checks without realizing there are smarter, more tax-efficient ways to give. If you’re donating appreciated stock, using donor-advised funds, or including charitable bequests in your estate plan, you can maximize impact for the charity and tax benefits for yourself.

We help Arizona families who want to give back do it in a tax-efficient way—so you can support causes you care about while minimizing taxes and maximizing impact.

Donating Appreciated Stock

If you’ve held stock or mutual funds for over a year and they’ve appreciated, donating them directly to a charity is almost always smarter than selling and donating cash.

Example: You own $10,000 of stock you bought for $2,000 (you have $8,000 in capital gains). If you sell it, you pay $1,200-2,000 in capital gains taxes (depending on your bracket) and donate $8,000-8,800 cash. If you donate the stock directly, the charity gets the full $10,000, you avoid capital gains taxes, and you still get a $10,000 tax deduction.

This works with publicly traded stocks, mutual funds, and ETFs. It doesn’t work as well with private company stock or illiquid assets (there are special rules and appraisal requirements).

Most charities accept stock donations easily—they have brokerage accounts set up specifically for this. It takes 10 minutes to transfer stock, and both you and the charity benefit.

Donor-Advised Funds: Charitable IRAs

A donor-advised fund (DAF) is like a charitable IRA. You contribute cash or appreciated assets, get an immediate tax deduction, and then recommend grants to charities over time. The money grows tax-free inside the DAF while you decide where to donate it.

This is perfect if you want to take a big deduction this year (maybe you sold a business or had an unusually high-income year) but want to spread donations over multiple years. You get the full deduction now, avoid capital gains on appreciated assets, and the DAF distributes grants as you recommend them.

DAFs also simplify record-keeping. Instead of tracking donations to 20 different charities, you make one contribution to the DAF and it handles grant distributions and tax reporting.

Fidelity, Schwab, and Vanguard all offer low-cost donor-advised funds with minimums as low as $5,000-10,000.

Charitable Bequests in Your Estate Plan

If you want to leave money to charity after you’re gone, including charitable bequests in your will or trust is simple and flexible. You can leave a fixed dollar amount (“$50,000 to XYZ charity”), a percentage of your estate (“10% to XYZ charity”), or remainder distributions (“whatever’s left after providing for my family goes to charity”).

Charitable bequests reduce your taxable estate (only matters if you’re above the $13.6M federal estate tax threshold, which most Phoenix families aren’t). But even if estate taxes don’t apply, charitable bequests let you support causes you care about without affecting your lifestyle during your lifetime.

You can also name charities as beneficiaries of retirement accounts (IRAs, 401(k)s). This is particularly tax-efficient because charities don’t pay income taxes on inherited retirement accounts, whereas your kids would. Leaving retirement accounts to charity and other assets to family often makes more tax sense.

Qualified Charitable Distributions (QCDs)

If you’re over 70½ and taking required minimum distributions (RMDs) from your IRA, you can donate up to $105,000/year directly from your IRA to charity using a Qualified Charitable Distribution (QCD). This counts toward your RMD but isn’t included in your taxable income—saving you taxes while supporting charities.

QCDs are especially valuable if you don’t need the RMD income and would just donate it anyway. Instead of taking the distribution, paying taxes, and then donating cash, you donate directly from the IRA and avoid the taxes entirely.

What We Do

We help Phoenix families figure out the most tax-efficient way to support charities based on their assets, income, and charitable goals. That includes identifying appreciated stock to donate, setting up donor-advised funds, coordinating charitable bequests with estate plans, and using QCDs for retirees with RMDs.

We coordinate with your CPA to make sure charitable giving strategies align with your overall tax plan, and we work with your estate attorney to include charitable bequests in your estate documents if desired.

The Bottom Line

If you’re giving to charity, there are smart ways and expensive ways to do it. Most Phoenix residents just write checks without realizing they could donate appreciated stock, use donor-advised funds, or include charitable bequests to maximize tax benefits and impact.

Want to give back in a tax-efficient way? Let’s review your charitable giving strategy.