Helpful Insight for Year End Giving

As we enter the season of giving, we would like to share some tips to maximize your personal tax advantages and the amount given to charity. Here are some strategies commonly used by families and individuals to maximize the tax benefit of their donations:

1. Donations via Cash, Check, or Credit Cards

Donations via cash, check, or credit cards are a common form of charitable giving. Many donors contribute regularly – monthly quarterly, or annually. You can set up a regular gift to the Bike Fed here.

Tax Considerations:

• Investments sold to raise cash will be subject to capital gains tax
• Subject to deduction limit based on adjusted gross income (AGI)

Best For:

• Taxpayers who make modest gifts throughout the year
• Those who do not have appreciated assets or qualify for QCDs (see strategy #3 below)

2. Donating Appreciated Securities

Donating appreciated securities can provide a double tax benefit: taxpayers may deduct the fair market value of the gift and avoid capital gains taxes.

Tax Considerations:

• Neither you, nor the receiving organization, will pay capital gains tax on the donated securities
• Eliminates unrealized capital gains for the taxpayer and the organization
• Subject to deduction limit based on adjusted gross income (AGI)

Best For:

• Individuals with significant unrealized gains in brokerage accounts
• Organizations structured to receive securities/stock gifts

3. Qualified Charitable Distributions

Qualified Charitable Distributions (QCDs) can be made directly from a Traditional IRA once the owner attains age 70½.

Tax Considerations:

• QCDs may be used to satisfy Required Minimum Distributions (RMDs) amounts
• Only available from Traditional IRAs (not employer plans or other types of IRAs)
• Subject to an annual maximum of $108,000 in 2025

Best For:

• Traditional IRA owners 70½ or older
• Individuals subject to RMDs (RMDs begin at age 73 in 2025)

4. Gifting to a Donor Advised Fund

Gifting to a Donor Advised Fund (DAF) allows the donor(s) to make a charitable contribution now and decide which organization(s) will receive the funds at some point in the future.

Tax Considerations:

• Contributions may be invested and grow tax-free
• Bunching strategy allows for greater tax benefits (see strategy #5 below)
• Subject to deduction limit based on adjusted gross income (AGI)

Best For:

• Donor(s) planning to make making large or significant recurring gifts
• Taxpayers with significant income
• Those who want flexibility in the timing of their gifts

5. Bunching Deductions

Bunching deductions accelerates multiple years of deductions (like charitable donations, property taxes, medical expenses, etc.) into one tax year to exceed the standard deduction.

All taxpayers may choose to itemize their deductions or take the standard deduction, a fixed dollar amount set and adjusted annually by the IRS that taxpayers can subtract from their AGI to reduce the amount of income on which they are taxed. For the 2025 tax year, the standard deductions are:

$15,750 for single filers and married individuals filing separately

$31,500 for married couples filing jointly and qualifying widow(er)s

$23,625 for heads of household

Tax Considerations:

• Maximize deduction over multiple years by itemizing in a single year
• Often used in conjunction with DAFs or larger one-time gifts

Best For:

• Taxpayers whose itemized deductions are close to the standard deduction
• Those with flexibility in timing their charitable gift(s)

Charitable giving is a powerful way to give back to the community. With the right strategy, it can also be a smart financial move.  Whether you’re donating cash, appreciated assets, or using tools like DAFs or QCDs, considering the tax implications of your gifting strategy can help you make the most of your generosity.

If you have any questions about your charitable contribution strategy, please consult with your financial advisor or, if you need assistance, please give either of us a call.

The information offered is provided to you for informational purposes only. Robert W. Baird & Co. Incorporated is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action.

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Featured Photo: Fat Bike World Championship in New Richmond, Wisconsin from the 2022 Ride Guide.