5 Tax-Savvy Ways to Give

Even if taxes aren’t the primary motivator for your giving strategy, consider these ways to make your giving go further:

1. Give Through a Donor Advised Fund

Especially in a high-income year, a donor-advised fund can be an impactful way to structure your charitable giving. A donor advised fund (DAF) gives you a low-cost way to donate appreciated stock, mutual funds or other assets and claim a federal income tax deduction in the year you make the donation.¹This strategy can give you some time to craft a thoughtful, long-term giving plan, while getting the full tax benefit right away. Additionally, these assets can remain invested and potentially grow, tax-free, until you recommend which charities should receive a cash donation from the fund.

2. Give the Gift of Education

Interested in helping your children or grandchildren cover the ever-increasing cost of college or private school tuition? Consider giving gifts through a 529 education savings plan. Money in such a plan grows tax-free, and you pay not taxes on withdrawals, if used for qualified education expenses.

Anyone, including grandparents, can contribute up to $18,000 per year ($36,000 for married couples electing to split gifts) to any individual’s 529 plan in 2024, without incurring federal gift tax or using the federal lifetime gift tax exemption. Those amounts increase to $19,000 for individuals and $38,000 for married couples electing to split gifts in the 2025 tax year.

Many states offer state income tax deductions or credits to residents who contribute to their own state’s plan, while some states offer tax deductions or credits regardless of which plan you invest in.

Additionally, unique to 529 plans, the federal tax code allows you to front load up to five times the annual gift tax exclusion amount in a single year.² In 2024, individuals can give up to $90,000 per recipient in a single year, while married couples electing to split gifts can give up to $180,000. In the 2025 tax year, those amounts increase to $95,000 for individuals and $190,000 for married couples electing to split gifts.

If you have the means, you can even take advantage of six-year gift tax averaging. To do this, you can contribute one year’s worth of gifts in December, followed by five years’ worth of contributions in January, effectively making six years’ worth of contributions in just two months.³

Also note that 529 plan account owners may take federal income tax-free 529 plan distributions not only for qualified higher education expenses, but also for certain primary and secondary education expenses, apprenticeship expenses and student loan repayments.⁴ New rules also allow you to transfer some unused 529 funds to a Roth IRA for the beneficiary, provided certain conditions are met.

3. Reduce Estate Taxes with Financial Gifts

You can gift up to $18,000 ($36,000 for married couples electing to split gifts) per recipient to an unlimited number of individuals in 2024 without incurring a federal gift tax by making use of your annual gift tax exclusion amount. Those amounts increase to $19,000 for individuals and $38,000 for married couples electing to split gifts in the 2025 tax year. Note that you can’t carry over unused annual exclusions from one year to the next.⁵

The annual gift tax exclusion doesn’t count against the federal gift tax exemption of $13.61 million for individuals or $27.22 million for married couples in 2024.⁶ In the 2025 tax year, the federal gift tax exemption increases to $13.99 million for individuals or $27.98 million for married couples.

4. Consider Available Tax Benefits When Choosing Which Assets to Donate from Your Investment Portfolio

You can donate securities to qualified charitable organizations or a donor-advised fund, and your tax benefits will depend, in part, on whether these securities have appreciated or depreciated in value relative to their purchase price.

For instance, if securities have appreciated since purchase and have unrealized capital gains, donating the securities themselves would allow individuals to take a deduction in the year they make the donation and avoid paying capital gains tax on the appreciation.

In contrast, if you donate securities which have unrealized capital losses, you could potentially miss an opportunity to realize those losses and subsequently offset realized capital gains. Therefore, in the case that you’re considering the donation of securities with embedded losses, it may be prudent to sell the securities first to realize the losses, and then donate the proceeds of the sale to a qualified charity for an additional federal income tax deduction.

Note that donating securities that you have owned for more than a year can allow you to take a larger deduction than donating securities that have been held for one year or less.⁷

5. Use Charitable Remainder Annuity Trusts (CRATs)

You may consider certain charitable planning strategies that benefit from a higher interest rate environment, such as Charitable Remainder Annuity Trusts (CRATs). With a CRAT, you as the grantor would create and fund an irrevocable trust and receive an income tax charitable deduction for the year the trust is funded. The CRAT subsequently distributes a stated annual annuity amount – in other words, an annual income stream – to you, your spouse or other non-charitable beneficiaries. The annuity amount is typically a stated percentage of the trust’s value at the time the trust is funded, which must be at least 5%, but no more than 50%. At the end of the term of the trust, the remainder of the assets are distributed to the charity or charities indicated within the trust agreement. When the trust is created, the present value of the charities' remainder interest must be at least 10% of the value of the trust.

The recent run up in interest rates may make this strategy more effective,  in part because higher interest rates mean that trusts with higher annuity payments to the non-charitable beneficiaries can satisfy the 10% remainder test. Speak with your tax advisor to see if this strategy makes sense for you, because such trusts are irrevocable, meaning once put them in place you cannot reverse them.

¹ The maximum deduction for a cash gift to a DAF is limited to 60 percent of adjusted gross income (AGI); deductions exceeding AGI limits may be carried forward for up to five years. Grants can be made over time to any U.S. organizations that are tax-exempt public charities, U.S. religious houses of worship, U.S.-qualified foreign charitable organizations and at a reduced benefit, to certain domestic and foreign organizations that do not qualify as U.S. public charities.

² An election to treat the gift as being made over a five-year period must be made on a gift tax return for the year in which the contribution is made.

³ This assumes there are no other gifts made by the donor to the beneficiary in the year of contribution to the 529 plan or in the four years after the year in which an accelerated gift is made. Any gifts made in the year of contribution to the 529 plan or in the four years after the year in which an accelerated gift is made may result in a taxable gift or use of the donor’s federal lifetime gift exemption. If the donor dies within five years of making an accelerated gift, a portion of the gift may be included in the donor’s estate.

⁴ Note, using 529 plan distributions to repay qualified student loans may impact the deductibility of student loan interest. The state tax treatment of 529 plans (including the state tax treatment of contributions and distributions) may be different from the federal income tax treatment and may vary based on the particular 529 plan in which you participate and your state of residence. If the applicable state tax law does not conform with the federal tax law, 529 plan distributions used to pay certain expenses, such as principal and interest on qualified student loans and/or qualifying apprenticeship costs, may not be considered qualified expenses for state tax purposes and may result in adverse state tax consequences to the account owner or designated beneficiary.

⁵  The transfers may help your family as a whole pay fewer taxes if you give income-earning property to family members in lower income tax brackets.

⁶ Any use of your lifetime federal gift exemption will result in a corresponding reduction in your federal estate tax exemption available at your death.  A portability election must be made on a deceased spouse’s estate tax return in order for the unused portion of the deceased spouse’s estate tax exemption to be available to the surviving spouse.

⁷  If a stock is held for one year or less, the deduction a taxpayer receives for donating that stock to a qualified charitable institution is limited to the lesser of the fair market value or cost basis of the stock. If the stock is donated after it has been held for more than one year, the taxpayer may receive a deduction equal to the fair market value of the stock.