Giving season is here.

Fortunately for you, being charitable comes with phenomenal tax benefits. 

It's the best of both worlds: you do social good, while also receiving very generous tax benefits if you play your cards right.

In this post, I report on the tricks used by the wealthiest Americans and their team of tax professionals to strategically use charitable contributions to reduce their taxes.

I’ll outline exactly how charitable giving benefits work — and my favorite strategies to maximize their impact.

Donating to charity typically gives you a dollar for dollar deduction on your taxes. 

Consider an example: if you have $500K of income and you donate $50K to charity, your taxable income is reduced to $450K.

There are two important caveats:

1) You need to itemize your deductions versus taking the standard deduction for charitable contributions to be fully deductible.

2) There is a cap on how much you can deduct as it relates to your taxable income. 

If you are donating cash, your maximum charitable contribution is capped at 60% of your adjusted gross income (AGI).

If you are donating appreciated assets, your maximum charitable contribution is capped at 30% of your AGI.

If you end up going over, you can typically "carry over" the deduction for up to 5 years. 

Donating to private foundations gets trickier since these are subject to lower caps of 30% cash and 20% in appreciated assets.

Something that initially surprised me about the American tax code is the diversity of institutions that can get you a charitable deduction under the right scenarios.

It’s not just contributions to organizations we traditionally think of as charities that count!

Most contributions go to a “qualified organization” which are typically 501c(3) organizations, that includes organizations operated exclusively for:

Additionally, you can contribute to either public charities or private foundations. And then, there are structures in between like charitable trusts and donor-advised funds that we’ll talk about later.

It’s easy to think of charitable contributions applying only to charitable causes, but there are lot of other causes that can get you a meaningful tax deduction!

Starting in 2026, the charitable contribution deduction gets slightly less generous for the wealthiest taxpayers, while offering a bit more to everyone else.

There are three important changes to be aware of:

1) Small charitable deductions available even to people who take the standard deduction

You can get a small above-the-line deduction (this reduces your AGI) of up to $1,000 (single) or $2,000 (married) for donations to public charities.

Donor-advised funds and private foundations would not count.

2) 0.5% Adjusted Gross Income (AGI) floor for itemized deductions

Itemized deductions will be subject to a 0.5% floor starting in 2026.

In the example above: with $500,000 income and a $50,000 donation, the first 0.5% or $2,500 will NOT be deductible for taxes. 

Your charitable deduction will only be $47,500.

3) Deduction benefit capped at the 35% federal tax bracket

Even if you pay taxes at the highest federal rate (37% right now), your charitable deduction benefit will be capped at a 35% tax rate. 

In practice, this means your charitable deduction amount is reduced by the difference between the two tax rates if you are at the highest tax bracket, making the tax saving impact smaller in 2026.

Putting it All Together

Let's consider the example of someone with an AGI of $1M making a $100K contribution.

In 2025, you would get a $100,000 deduction and a $37,000 tax savings (at the 37% tax bracket).

In 2026, there is now a cap and a floor. With the 0.5% AGI floor, the first $5,000 is not deductible at all.

Tax savings on the leftover amount is capped at 35% leading to tax savings of $95,000 * 35% = $33,250

The exact same charitable donation in 2026 will save you $3,750 less in taxes.

If you are debating between a large charitable deduction in 2025 and 2026, you’ll save more on your taxes this year.

Wherever possible, consider donating long-term appreciated assets instead of cash.

You unlock two tax benefits:

1) You avoid capital gains taxes on the sale

2) You can deduct the full fair-market value of the asset… not just what you bought it for.

Everyone wins — you get a bigger tax deduction and the charity gets more money.

But, there are two important restrictions to be aware of:

1) You can only deduct the appreciation on long-term appreciated assets that you have held for 1-year or more. Short-term assets are limited to what you paid in costs!

2) This deduction is capped at 30% of your AGI for a given year. If you go over, you can carry forward the deduction for up to 5 years.

You can donate all kinds of appreciated assets to charity and capture a big tax deduction. The most common types are:

Public Company Stock

This is the most common appreciated asset that is donated to charity since it’s extremely straightforward to calculate the fair-market value.

A strategy I like to use while donating stock:

Unlike tax loss harvesting, there is no mandatory 30-day waiting period before buying back the exact same security.

Cryptocurrency

Donating crypto works very similarly to public stock. Lots of modern charities and donor-advised funds now accept contributions in crypto.

As long as you have held it for more than 365 days, you can deduct the fair market value on donation.

Private Company Stock

Donating shares in private companies strategically can save you a meaningful amount of money, particularly if you are the founder and own a large amount of equity.

However, this is substantially trickier to execute and typically requires professional help making it only worth it for very large donations.

A few different things you’ll need to execute this:

Art

Donations are not just limited to financial assets!

You can donate art to charity — and as long as the charity uses the art in a way that is related to its exempt purpose, you can capture a deduction at the full fair-market value.

This means if you donate art to a museum, you can get a deduction for the full current value of the art.

If you donate art to another type of charity, you are limited by what your cost was.

Again, you need a qualified third party appraisal here as well.

For the right art investor with a discerning eye for spotting undervalued artwork, this can save a massive amount in taxes.

A donor-advised fund (DAF) may be my favorite charitable giving tool.

A DAF allows you to make an upfront contribution of either cash or other appreciated assets, and receive a full deduction for the amount donated.

Once the assets are inside the fund, you can then donate to charity on your own timeline… even many years later!

A DAF is especially useful in a couple of scenarios:

The assets inside the donor-advised fund are also typically invested so they are constantly growing, leading to more money for charity down the line.

A donor-advised fund is a very valuable tool in “bunching deductions”.

Charitable contributions are one of the many tax deductions that are only available if you itemize your deductions.

If you are itemizing in a specific year, but typically take the standard deduction, it could be worth “bunching deductions” and trying to sneak in a few other itemized deductions for that specific calendar year.

Some tools for squeezing in extra itemized deductions include:

For taxpayers over the age of 70.5, qualified charitable distributions or QCDs can be substantially more advantageous than regular charitable contributions.

A QCD allows retirees to contribute up to $108,000 (in 2025) to a qualified public charity from their Traditional IRA.

A QCD has a few separate tax benefits:

1. Charitable deduction without needing to itemize, lowering AGI

Taxpayers can deduct a QCD “above-the-line” to reduce their adjusted gross income directly.

This allows people to take a tax deduction from a charitable contribution without needing to itemize i.e. you can take both the standard deduction and get a dollar-for-dollar tax deduction for gifting to charity.

A QCD also reduces the taxpayers AGI. This helps in a bunch of other ways like keeping you in a lower tax bracket, reducing taxation on Social Security benefits, Medicare premiums and more.

2. Bypasses the 2026 restrictions on charitable gifts

QCDs bypass the new two 2026 changes that make charitable contributions less tax-advantageous: the 0.5% AGI floor and the benefit cap for 37% taxpayers.

3. Satisfies taking RMDs tax-free

If you are subject to required minimum distributions (RMDs), a QCD fulfills the distribution requirement without triggering any taxes.

If you otherwise take the distribution and then donate to charity, you would still be on the hook for the taxes due.

Despite this rather comprehensive post, I’m barely scratching the surface on some of the more advanced strategies that I will save for a later time.

I’ll quickly list and summarize some of them here so you know what to look for in the future:

For super high net-worth taxpayers, a foundation is substantially more powerful than a donor-advised fund. But, a foundation is a lot, lot more painful to administer.

With a foundation, you have complete control over every aspect — you can hire family members and pay them salaries, you can fund scholarships, you have full autonomy over grants and operations.

However, they take a lot of work to run!

You also have to donate at least 5% of the assets every single year and your maximum deduction is capped at a lower percentage.

This is a highly controversial strategy of donating land use restrictions (i.e. agreeing to not develop certain land you may own) to a qualified organization in return for a large write-off.

CRTs are irrevocable trusts that pay you an income stream for a specific period of time, while donating the rest to charity.

CLTs are the opposite structure - they pay an income stream to charity, while leaving the rest to you.

This sounds crazy, but you can donate your life insurance value to charity (i.e. charity gets paid when you die) and receive a tax deduction for the cash value of the policy at the time.

What did you think of today’s issue? Reply to this email, I’d love to know.

I personally read every single response!

Author Disclosure: I'm writing this as myself, not as some investment adviser or broker-dealer. I’m not a tax professional, this is all purely educational or my personal thoughts - not investment, legal, tax, or professional advice. Financial decisions involve risk, including losing money. Taxes are complex. Please do your own research or talk to a licensed pro before acting on anything you read here.

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