Giving With Purpose: Charitable Strategies, Tax Savings, and Creating a Family Legacy

The holiday season often brings generosity to the forefront. We think about the people and organizations that have made a difference in our lives and how we might give back.

But meaningful giving doesn't have to be limited to the holiday season. With a little planning, charitable giving can become an important part of your financial plan, helping you support the causes you believe in, make thoughtful tax decisions, and share your values with the next generation.

And with several changes to the charitable giving tax rules taking effect in 2026, now is a good time to revisit how you're giving and whether there may be opportunities to make your generosity go further.

Start With What Matters to You

Before thinking about how much to give or which tax strategy to use, we encourage clients to start with a more personal question: What do you want your generosity to accomplish?

Maybe it's supporting a local food bank, helping students afford college, protecting the environment, or giving back to an organization that helped your family through a difficult time.

For some, charitable giving is about making a difference today. For others, it's also about creating a lasting impact that continues beyond their lifetime.

There's no single right way to give. The important thing is making sure your generosity reflects your values and fits comfortably within your broader financial plan.

Consider Giving Appreciated Investments Instead of Cash

One charitable giving strategy that is often overlooked is donating appreciated investments, such as stocks or mutual funds, rather than writing a check.

Let's say you purchased shares of stock years ago for $10,000, and those shares are now worth $30,000.

If you sell the shares, you may owe capital gains tax on the $20,000 appreciation. But if you donate those shares directly to a qualified charity, you can generally avoid recognizing that capital gain.

If you've held the investments for more than one year and itemize your deductions, you may also qualify for a charitable deduction based on their full fair market value, subject to applicable limitations.

This can be particularly useful for investors who have highly appreciated positions in taxable accounts or want to reduce concentration in a particular stock.

The charity receives the full value of the investment, and you may be able to accomplish your charitable goals more tax-efficiently than by selling the investment and donating the proceeds.

Of course, the details matter. Not all assets qualify for the same treatment, and the tax benefit depends on your individual circumstances.

What's Changing With Charitable Giving Tax Rules in 2026?

Several important tax changes take effect in 2026, making this a good time to revisit how you approach charitable contributions.

A new deduction for taxpayers who don't itemize. Beginning in 2026, individuals who take the standard deduction may be eligible to deduct up to $1,000 in qualifying cash charitable contributions, or $2,000 for married couples filing jointly. This provides a new tax benefit for many taxpayers who previously received no federal deduction for their charitable giving.

This deduction generally applies to qualifying cash gifts made directly to eligible charities, not gifts of appreciated securities or contributions to donor-advised funds.

A new threshold for taxpayers who itemize. Beginning in 2026, charitable deductions are generally allowed only to the extent that total eligible contributions exceed 0.5% of adjusted gross income (AGI).

For example, if your AGI is $300,000, the first $1,500 of charitable contributions generally won't produce an itemized charitable deduction. If you contribute $10,000, the amount potentially deductible after applying that threshold would be $8,500, subject to other applicable limitations.

A limitation for taxpayers in the highest tax bracket. For taxpayers in the 37% federal income tax bracket, the value of itemized deductions is generally capped at 35 cents per deductible dollar beginning in 2026.

These changes don't necessarily mean you should give more or less. But they do make it worthwhile to consider when, how, and what you donate.

Consider Bunching Contributions With a Donor-Advised Fund

For families who give regularly, a donor-advised fund (DAF) can be a useful planning tool.

A donor-advised fund allows you to make a charitable contribution now, potentially receive a tax deduction in the year of the contribution, and recommend grants to qualified charities over time.

For example, suppose you typically donate $10,000 annually to your favorite organizations. Rather than contributing that amount each year, you might contribute $30,000 to a donor-advised fund in one year and distribute grants over the following three years.

This strategy, often called bunching, can help concentrate charitable deductions into a year when they may provide a greater tax benefit, particularly if your other itemized deductions are close to the standard deduction.

It may also help you exceed the new 0.5% AGI threshold for itemized charitable contributions.

And if you fund the donor-advised fund with appreciated investments, you may receive the additional benefit of avoiding capital gains tax on the donated appreciation.

A donor-advised fund isn't right for everyone. Contributions are irrevocable, and sponsoring organizations charge fees. But for families who want to give consistently while being thoughtful about taxes, it can be worth exploring.

Don't Overlook Qualified Charitable Distributions in Retirement

For retirees age 70½ or older, a qualified charitable distribution (QCD) can be another particularly valuable strategy.

A QCD allows you to transfer funds directly from an IRA to an eligible charitable organization without including the qualifying distribution in taxable income.

For those subject to required minimum distributions (RMDs), a QCD can also satisfy all or part of the year's RMD.

Unlike an itemized charitable deduction, a QCD can provide a tax benefit even if you take the standard deduction. And because the qualifying distribution is excluded from adjusted gross income, it may help manage other tax considerations, including the taxation of Social Security benefits and Medicare income-related premium adjustments.

One important distinction: QCDs cannot be made to donor-advised funds.

For clients who are already charitably inclined, we often find that coordinating charitable giving with retirement distributions can be particularly effective.

Involve Your Family and Pass Along Your Values

One of the most meaningful aspects of charitable giving has little to do with taxes.

Giving can be a wonderful opportunity to share your values with children and grandchildren.

Rather than simply telling the next generation which organizations you support, consider involving them in the process.

You might set aside an amount each year for family members to direct toward causes they care about. Perhaps each grandchild researches a nonprofit, explains why its mission matters to them, and helps decide where a portion of the family's charitable dollars should go.

Or you might establish a family tradition of volunteering together during the holidays.

For families with donor-advised funds, involving adult children in grant recommendations can create an opportunity for conversations about generosity, financial responsibility, and the kind of impact your family hopes to make.

These discussions can be especially meaningful because they help younger generations understand not just what you're giving, but why.

And there's something valuable about recognizing that different family members may care deeply about different causes. The goal isn't necessarily to have everyone support the same organizations, but to develop a shared appreciation for giving back.

Think About the Legacy You Want to Leave

Charitable giving can also be part of your estate planning.

For example, you might name a qualified charity as a beneficiary of a portion of your traditional IRA. Because traditional IRA distributions are generally taxable to individual beneficiaries but usually not to tax-exempt charities, this can be a tax-efficient way to leave a charitable legacy.

You might also incorporate charitable bequests into your will or trust or establish a donor-advised fund that allows family members to continue recommending grants after your lifetime, subject to the sponsoring organization's policies.

But creating a legacy doesn't always require a formal charitable structure or a large financial commitment.

Sometimes it begins with a family conversation about what matters most, a tradition of supporting a local organization, or a commitment to giving time and talents as well as money.

The legacy we leave isn't measured only by the assets we pass along. It's also reflected in the values, priorities, and examples we share with the people who come after us.

Aligning Your Giving With Your Financial Plan

At Birch Street, we believe charitable giving is most meaningful when it's connected to the bigger picture.

That means looking beyond the tax deduction to consider how your giving fits with your retirement income needs, investment portfolio, estate plan, and family priorities.

Sometimes that involves donating appreciated securities. Other times, it means coordinating QCDs with required minimum distributions, bunching charitable contributions, or helping families develop a giving plan that spans generations.

The goal isn't simply to minimize taxes. It's to make thoughtful decisions that allow you to support the causes you care about while remaining confident in your own financial future.

As the year comes to a close, consider taking a little time to reflect on what generosity means to you and your family.

Because aligning your money with meaning isn't just about how you spend and save. It's also about the difference you choose to make.