Give With Intention — Why How You Give Matters as Much as What You Give

Fair — that was really just the newsletter section restated. Here's a fuller version with more mechanics, more of the "why," and an actual example.

Give With Intention: Why How You Give Matters as Much as What You Give

For a lot of the families I work with, giving isn't a year-end tax move — it's a value they've held for decades. A church, a hospital, a scholarship fund, the organization that helped raise their kids. The instinct to give rarely needs prompting.

What does need attention is the mechanics. Two people can give the exact same dollar amount to the exact same charity and walk away with very different tax outcomes, depending on how the gift was structured. That gap is worth understanding before you write the check — not after.

Cash isn't always the most efficient way to give

If you're donating from a brokerage account, giving cash is usually the least tax-efficient option available to you. If you've held an investment for more than a year and it's appreciated, gifting the shares directly to the charity — rather than selling the shares and donating the proceeds — means you avoid paying capital gains tax on the appreciation, and you still get to deduct the full fair market value if you itemize. The charity, as a tax-exempt organization, doesn't pay capital gains tax either. Selling first and donating cash creates a tax bill for you that gifting the securities directly simply avoids.

QCDs: a different tool for a different situation

If you're an IRA owner 70½ or older, a Qualified Charitable Distribution works differently — and solves a different problem. A QCD sends money directly from your IRA to a qualifying charity, and when it's done correctly, two things happen: it can count toward your Required Minimum Distribution for the year, and the amount generally never shows up in your adjusted gross income at all — not as income, and not as a deduction you have to itemize to claim.

That last point matters more than people expect. Keeping a distribution out of AGI entirely, rather than taking the income and then deducting it, can be the difference between staying under an IRMAA threshold and triggering a Medicare premium surcharge the following year. It can also help keep other income-based benefits and deductions intact. For someone who already takes the standard deduction and gets no tax benefit from a normal charitable gift, a QCD can restore that benefit in a way writing a check never would.

A QCD isn't automatically the better choice, though. It only works from IRA assets, it's capped annually, and it only makes sense if you're already 70½ and either taking or approaching RMDs. Appreciated stock might be the better tool if the asset you want to give away sits in a taxable brokerage account instead.

For donors who take the standard deduction: bunching

Here's a scenario that comes up often: a couple gives $8,000 a year to causes they care about, consistently, every year. But because their itemized deductions fall short of the standard deduction most years, that giving produces no additional tax benefit — the standard deduction would have covered them anyway.

One way around that: bunching. Instead of giving $8,000 every year, they give $24,000 once every three years — either directly, or into a donor-advised fund that lets them take the deduction in the bunched year while distributing the money to charities over time on their own schedule. In the bunched year, itemizing (including the charitable gift) may exceed the standard deduction, producing a real tax benefit. In the other two years, they take the standard deduction as usual. Same total giving over three years, potentially meaningfully better tax outcome.

The takeaway

None of these strategies change what you give or who you give it to. They change how much of that gift's value the IRS quietly takes a share of along the way — and for many of the families I work with, that's money that could have stayed with the charity, or with them.

If giving matters to you, fall is the right time to decide who you want to support, how you'll fund it, and which of these tools — cash, appreciated stock, a QCD, or a donor-advised fund — actually fits your situation. Not the third week of December, when the deadlines have tightened and the options have quietly narrowed.

This article is for informational purposes only and not tax advice. Always consult your tax preparer for guidance specific to your situation.

LynnLeigh & Company - A Registered Investment Advisor This information is provided by LynnLeigh & Co. for general information and educational purposes based upon publicly available information from sources believed to be reliable – LynnLeigh & Co. advisors cannot assure the accuracy or completeness of these materials. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.   Past performance is not a guarantee of future returns.

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