Charitable Giving: How to Execute More Efficiently

Eric Schierhorn

Year end is often a time when individuals and families complete their charitable giving for the year. As you consider how much you’d like to give and who to give to, you should also consider the efficiency in which these donations are made. Depending on your financial situation, there may be ways to complete your donations in a manner that benefits both you and the charity.

What Assets Can You Donate?

The most common way to make donations is by cash or check. However, donating appreciated stocks, bonds, mutual funds, real estate and other assets outside of qualified retirement accounts has become increasingly popular. If the asset has been held for more than a year (rules vary for real estate) at the time of donation, the donor can claim an itemized deduction in the amount of the fair market value of the asset (up to 30% of AGI). In addition, the donor gets the advantage of not having to recognize the capital gains tax that would have been incurred upon the sale of the asset. Therefore, you are able to donate the same amount while not experiencing a tax bill.

Charitable Donations to Offset High Taxes

Charitable donations (or larger than normal donations) often make sense for those experiencing large taxable events in the current year. Making donations can help offset the unusually high tax burden while simultaneously contributing to causes you care about. Some of the following are common scenarios where you might have a larger than normal tax bill:

  • Unusually high income: high bonus compensation, sale of a business, real estate, partnership, etc.
  • Portfolio rebalancing: Rebalancing portfolios to target asset class weighting often involves selling appreciated securities, which will trigger capital gains tax. Donating those appreciated securities, instead of selling, can allow you to rebalance your portfolio while, in some cases, claiming a deduction for the fair market value of the security.
  • Retirement account withdrawals: Those who don’t need their full required minimum distribution (RMD) from their retirement accounts to fund their lifestyle might benefit from making their donations via a qualified charitable distribution (QCD). A QCD involves making a direct donation from a retirement account to a qualifying charity. Unlike regular IRA/401k withdrawals, a QCD isn’t recognized as taxable income. So you are able to fulfill your RMD, while also not recognizing the amount donated as taxable income.

Ways to Efficiently Donate

1.) Donor Advised Fund

A donor advised fund (DAF) is like an investment account geared towards making donations to the organizations you care about. Donor advised funds can be relatively inexpensive to setup, and often allow for immediate deductions on the donation of cash, securities, business interests, real estate, etc. The funds can be invested (or remain invested) to grow tax free until you are ready to make your donations. DAFs have become increasingly popular for those who are charitably inclined and want to use appreciated assets for tax efficient giving.


2.) Qualified Charitable Distributions

As stated previously, QCDs are a great vehicle to make charitable donations while saving on taxes for those taking Required Minimum Distributions (RMDs).

Which Options Make Sense for You?

Gifting strategies, and their feasibility, vary greatly from person to person, and family to family. Connect with your accountant and financial advisor to help determine if the options and strategies listed above make sense for your specific situation. Please reach out to anyone on the Abbey Street team if you’d like to learn more.


Abbey Street, LLC (“Abbey Street”) is a Registered Investment Advisor (“RIA”) registered with the SEC. Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Abbey Street renders individualized responses to persons in a particular state only after complying with the state’s regulatory requirements, or pursuant to an applicable state exemption or exclusion. All investments carry risk, and no investment strategy can guarantee a profit or protect from loss of capital. The information contained in this article is intended to provide general information about Abbey Street and its services. It is not intended to offer investment advice. Investment advice will only be given after a client engages our services by executing the appropriate investment services agreement and shall be subject to the terms and conditions therein. Information regarding investment products and services are provided solely to read about our investment philosophy and our strategies and to be able to contact us for further information. You should not rely on any information provided on our web site in making investment decisions. Market data, articles and other content discussed in this video are based on generally-available information and are believed to be reliable. Abbey Street does not guarantee the accuracy of the information contained in this video. The information is of a general nature and should not be construed as investment advice and relied upon in making investment decisions. Abbey Street will provide all prospective clients with a copy of our current Form ADV, Part 2A (Disclosure Brochure) prior to commencing an advisory relationship. However, at any time, you can view our current Form ADV, Part 2A at  In addition, you can contact us to request a hardcopy.
Eric Schierhorn Headshot

About The Author

Eric Schierhorn

Eric Schierhorn is a Private Wealth Advisor at Abbey Street and is uniquely skilled in our financial planning technology. Eric holds a Certified Financial PlannerTM designation and supports the Private Wealth Management team.

View bio

Get in touch with Abbey Street

Start a conversation to learn more about who we are and what we do. Our team is ready to make an impact.

Contact Us