The way most charitably-inclined Americans give to charity has been broken since 2018 — by the same tax-reform legislation that nearly doubled the standard deduction. Before 2018, a household making routine annual donations to a church, college, or community organization could itemize their tax return and deduct those donations on top of mortgage interest, state-and-local taxes, and other itemized items. After the 2018 reform, the much-larger standard deduction means most charitably-inclined households don’t itemize at all — and their charitable giving generates exactly zero tax benefit at the federal level.

This isn’t a reason to give less. It’s a reason to give strategically. Several specific tools available in the current tax code restore the tax benefit of charitable giving for households that don’t itemize annually, often at substantially higher leverage than the old itemize-everything-each-year approach. This piece walks through the four most-used: bunching with a donor-advised fund, qualified charitable distributions from an IRA, gifting appreciated securities, and charitable remainder trusts. None of these is exotic. Most are operationally simple. All of them deserve consideration before you write your next check to charity.

Why the standard-deduction era broke the old way of giving

For most of US tax history, charitable giving worked like this: you donated, you itemized, you deducted. Even modest donations produced some tax benefit because itemized deductions were already in use for mortgage interest, state taxes, etc.

The 2017 Tax Cuts and Jobs Act changed two things:

  1. It nearly doubled the standard deduction (from ~$13,000 to ~$24,000 for MFJ at the time, with subsequent inflation adjustments — roughly $30,000 for MFJ today)
  2. It capped the State and Local Tax (SALT) deduction at $10,000

The combined effect: the bar for “itemizing makes sense” went much higher, and the practical reality for most households became “take the standard deduction, lose the tax benefit of charitable giving.”

For households that don’t itemize, a $5,000 donation in cash produces zero federal tax benefit. The deduction is technically allowed, but it never gets used because it’s smaller than the standard deduction the household is taking anyway. The donation is still good for the charity; it just isn’t getting the tax-leverage that giving used to provide.

The strategies below restore that leverage.

Strategy 1: Bunching with a Donor-Advised Fund (DAF)

Bunching is the simple insight that if you can’t itemize every year, you can sometimes itemize every other year — by concentrating two or more years of giving into a single calendar year. A household that normally donates $10,000/year to charities (which doesn’t trigger itemization) might instead donate $30,000 in year 1 and $0 in years 2-3 (which does trigger itemization in year 1). The net giving is the same; the tax outcome is meaningfully better.

The operational problem: most charities can’t smooth out a $30,000 lump sum into the three years of $10,000 they were used to receiving. If the donor really wanted to maintain the steady annual support pattern, bunching directly to the charity doesn’t work.

The solution is the Donor-Advised Fund (DAF) — a charitable giving account at a 501(c)(3) sponsor (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or a community foundation) where:

  • You contribute to the DAF whenever you want, in any amount, and receive the full tax deduction in the year of contribution
  • The DAF invests the contribution (you choose from a small set of investment options)
  • You direct grants from the DAF to qualified charities at any time, in any pattern, with no further tax consequences

The bunching strategy with a DAF works like this: contribute three years of giving ($30,000) to the DAF in year 1, take the $30,000 deduction in year 1 (which lifts you above the standard deduction and produces real tax benefit), then grant $10,000 from the DAF to your favorite charities in each of years 1, 2, and 3 — preserving the pattern of steady annual support to those charities.

The receiving charities never know the difference. Your tax outcome is meaningfully better. The DAF takes a small administrative fee (~0.6% per year at the major sponsors), but the tax benefit dwarfs it for households doing the strategy correctly.

For high-bracket donors making consistent annual gifts, the bunching-via-DAF strategy is almost always the right structure. Set up the DAF once, fund it on a 2-3 year cadence, and grant from it annually.

Strategy 2: Qualified Charitable Distributions (QCDs) from an IRA

If you are at least 70½ years old and have an IRA, the Qualified Charitable Distribution (QCD) is often the most efficient way to give. We covered the mechanics in our RMDs piece; the relevant points for charitable giving:

  • A QCD goes directly from your IRA to a qualified charity — never passing through your tax return
  • It counts toward your RMD if you’re at the RMD age
  • It is NOT included in your taxable income — meaning it doesn’t show up on the AGI line, doesn’t affect your tax bracket, doesn’t trigger the Social Security taxability cliff or IRMAA brackets
  • Annual limit (around $108,000 in 2026, indexed annually for inflation) per individual — verify the current-year limit at the IRS website

The QCD effectively replicates the old “itemize and deduct” tax benefit without requiring you to itemize. A $20,000 QCD reduces your AGI by $20,000 vs. taking the same RMD into income and donating $20,000 by check (which would produce no deduction if you don’t itemize). The tax savings can be several thousand dollars annually, on top of the avoided AGI-cliff effects.

For charitably-inclined retirees with traditional IRAs and meaningful annual giving, the QCD should be the default giving mechanism as soon as the donor reaches 70½. This is true whether or not the donor is itemizing.

QCDs do not work for Roth IRAs (since Roth IRAs aren’t pre-tax, the QCD’s no-tax-on-distribution feature has nothing to bypass). They also don’t work for 401(k) accounts — only IRAs.

Strategy 3: Gifting Appreciated Securities

If you have a stock or fund in a taxable account that has appreciated significantly, donating the security directly to a qualified charity (or DAF) is meaningfully better than selling the security and donating the cash proceeds.

The math:

  • Sell, then donate: You realize the capital gain, pay tax (15-23.8% federal long-term cap gains plus state), donate the after-tax proceeds. Your deduction is limited to the after-tax amount you gave.
  • Donate directly: You transfer the security itself to the charity. You never realize the capital gain. The charity sells the security and pays no tax (charities are tax-exempt). You deduct the full fair-market value of the donation.

For securities with substantial unrealized gains, the difference is meaningful — you avoid 15-25% in capital gains tax that would have been paid on a sale, AND you get a deduction at full FMV. The dollar saved on the gain plus the dollar deducted often comes to a 30-40% combined federal benefit on the value of the donation, vs ~25% on a cash gift of the same dollar amount.

Practical points:

  • The security must have been held at least one year to qualify for full FMV deduction. For shorter holding periods, the deduction is limited to cost basis.
  • The receiving charity must accept securities. Larger charities and all DAFs do. Smaller community charities sometimes don’t have brokerage accounts; in that case the cleanest path is to donate the security to a DAF and then grant cash from the DAF to the smaller charity.
  • The donor’s deduction has AGI limits — generally 30% of AGI for appreciated-securities donations to public charities (vs 60% for cash). For very large gifts in a single year, this can carry forward up to 5 additional years.
  • Coordinate with bunching. Donating appreciated securities into a DAF in a bunching year is the highest-leverage version of the strategy — capital-gains avoidance, full-FMV deduction, tax benefit in the right year, and ongoing grant flexibility from the DAF.

For donors with concentrated stock positions (long-time employees with appreciated company shares, holders of investments with substantial unrealized gains), this is often the most tax-efficient form of charitable giving available.

Strategy 4: Charitable Remainder Trust (CRT)

A Charitable Remainder Trust is a more sophisticated structure for donors who want to:

  1. Donate a substantial appreciated asset (highly-appreciated stock, real estate, business interest)
  2. Generate an income stream from that asset for life or a term of years
  3. Leave the remainder to charity at the end

The mechanics:

  • Donor transfers appreciated asset into the CRT
  • The CRT (a tax-exempt entity) sells the asset, paying no capital gains tax
  • The CRT pays an income stream to the donor (or other named beneficiary) for life or for a term of up to 20 years
  • At the end, whatever remains in the CRT goes to one or more named charities

Tax features:

  • Donor gets an immediate income-tax deduction for the present value of the remainder interest going to charity (the deduction is computed using IRS-published actuarial tables and rate assumptions)
  • Donor avoids the immediate capital-gains tax on the asset that funded the CRT
  • Donor receives an income stream taxed as ordinary income (or partly capital gains, depending on what the CRT earns)
  • Charity ultimately receives the remainder

CRTs are useful for very specific situations: a donor with a highly appreciated asset (often $500K+) who wants both immediate tax benefit and ongoing income, and who is comfortable making the charitable commitment irrevocable. They’re not retail products — setup involves attorneys, ongoing administration is non-trivial, and the IRS has detailed compliance requirements.

For donors in the right situation, the CRT is one of the most powerful charitable-giving structures available. For donors not in that specific situation, the simpler tools above (DAF, QCD, appreciated securities) accomplish most of what’s needed without the complexity.

Common charitable-giving mistakes

In rough order of frequency:

  1. Writing checks instead of using these strategies. The default behavior — write checks, take the standard deduction — leaves the tax benefit of giving on the table for most households.
  2. Donating cash when appreciated securities are available. Selling-then-donating cash is meaningfully worse than direct security donation for appreciated holdings.
  3. Skipping QCDs once eligible. Once you’re 70½, every dollar of charitable giving that goes through a regular check (rather than a QCD) is leaving meaningful tax savings on the table.
  4. Using a DAF for one-year giving when bunching is the actual play. The DAF’s value is in enabling bunching across multi-year periods. A donor using a DAF as a one-year holding account isn’t capturing the strategy’s leverage.
  5. Setting up a CRT for the wrong situation. CRTs work for very specific cases. They’re complex and the deduction is tied to the present-value calculation, which can produce surprises if the donor’s life expectancy is shorter than expected. Don’t choose a CRT just because it sounds sophisticated.
  6. Forgetting the AGI limits. Cash gifts to public charities are deductible up to 60% of AGI; appreciated property up to 30% of AGI. Donations exceeding the limit carry forward up to 5 years, but this should be planned for in advance, not discovered at tax-filing time.
  7. Giving from a Roth IRA instead of a Traditional IRA. Roth dollars are already tax-free; “donating” them produces no additional tax benefit beyond what was already realized. The Traditional IRA is the correct source for QCDs.

How TTCM coordinates charitable-giving planning

For charitably-inclined clients, several things are part of the process:

  • Establish a DAF for any client doing $5,000+ of annual giving — typically Fidelity Charitable or Schwab Charitable, depending on where the client’s other assets sit. The setup is a one-time 30-minute task and pays for itself in the first bunching year.
  • Run the bunching cadence annually — confirming whether the upcoming year is a bunching year (front-load 2-3 years into a DAF contribution) or a granting year (no fresh contribution; grant from DAF to charities). The cadence depends on the client’s giving level relative to standard-deduction thresholds.
  • Default to QCDs once the client is 70½ for any annual giving, with annual coordination on the QCD limit and the IRA from which it’s drawn.
  • Identify appreciated-securities candidates in the client’s taxable accounts annually — positions with substantial unrealized gains are the natural funding source for charitable contributions, particularly into a DAF.
  • Coordinate with estate counsel on CRT structures when client situation merits — typically very-high-value appreciated asset, charitable intent, and need for an ongoing income stream. Run the present-value math before committing.
  • Coordinate with beneficiary-designation planning — naming a charity as IRA beneficiary at death is meaningfully more tax-efficient than naming the charity in the will. We make sure the structure aligns with the client’s overall charitable intent.

Closing

If you give to charity annually and you’re not using a DAF, QCDs (where eligible), and appreciated securities, you’re leaving meaningful tax leverage on the table — and the giving itself isn’t getting any harder by capturing it. Schedule a complimentary 30-minute review with Tim Travis if you want to walk through your specific charitable situation: bunching cadence, DAF setup, QCD strategy, appreciated-securities pipeline, and how the charitable-giving plan integrates with the rest of your tax structure. No fee, no obligation, no pressure.

Disclaimer

This is general educational content and is not personalized investment, tax, or legal advice. Charitable-giving rules, deduction limits, and QCD thresholds are set by Congress and the IRS and are inflation-adjusted annually; specific dollar figures referenced are illustrative as of publication — verify current-year limits with the IRS or a qualified tax professional. Past performance does not guarantee future results. T&T Capital Management is an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.