Year-end planning 2025: Charitable giving strategies and planning opportunities

As we wrap up the year, giving to your favorite charity can bring a sense of happiness, purpose and fulfillment.

Many people give because they want to make a positive impact on their community or support a cause they care about—helping to make the world a better place.

Simple gifting strategies, such as those listed below, can be implemented before year-end.

Annual gifting

In 2025, an individual can give up to $19,000 to as many people as they wish without reporting the gift on a tax return or paying additional tax. This is known as the annual gift tax exclusion.

If the donor is married, each spouse can give $19,000 to the same person, for a combined total of $38,000.

This exclusion applies to more than cash gifts. For example, forgiving debt or transferring stock also qualifies, provided the fair market value of the gift does not exceed the annual limit.

Cash donations to charities

For individuals who itemize deductions, up to 60 percent of adjusted gross income may be deducted for cash contributions to qualified public charities.

One important caveat: the 60 percent limit applies only to cash donations made to qualified public charities. If you donate non-cash assets, such as securities or property, the deduction limit drops to 30 percent of AGI.

Gifting appreciated securities

Donating long-term, highly appreciated taxable securities—such as stocks, mutual funds, and exchange-traded funds  —to nonprofit organizations is one of the most tax-efficient ways to give. By doing so, you receive a tax deduction for the full fair market value of the gift without paying the capital gains tax you would owe if you sold the securities.

This strategy also increase the amount available for charitable giving because you avoid capital gains taxes entirely. In other words, you donate the full value of the security, not its after-tax amount.

Assets held for at least one year before being donated offer significant benefits:

—Capital gains taxes are avoided on the future sale of the securities.

—A tax deduction for the full fair market value of the securities, up to 30 percent of AGI, is available.

—This deduction applies only if you itemize on your tax return. If your total deductions fall below $15,750 for single filers or $31,500 for married filing jointly, this strategy will not reduce your taxes.

Most banks and brokerage firms can assist with this transaction, but they typically require a signed letter of instruction to transfer the shares to a charity. Do not wait until the last week of December to start this process, as it may not be completed before year-end.

Qualified charitable deductions

At the end of 2015, lawmakers approved a permanent provision allowing individuals who are age 70 1/2 or older to make QCDs directly from their individual retirement account (IRA) to qualified charities. The donated amount is excluded from taxable income, unlike regular IRA withdrawals, which are taxed as ordinary income. Lower taxable income may also help reduce Medicare premiums, which are income-based.

Key facts about QCDs:

—A QCD can be made only on or after the IRA owner reaches age 70 ½.

—The distribution must be paid directly from the IRA to the qualified charity.

—QCDs are limited to $108,000 per person annually and must be completed by December 31 of the calendar year.

—Account holders may make a one-time gift of up to $54,000 (deducted from their $108,000 annual limit) to a charitable remainder unitrust, charitable remainder  annuity trust, or a charitable gift annuity.

—The charitable distribution can satisfy the IRA’s required minimum distribution (RMD) but cannot exceed it.

—QCDs are not subject to tax withholdings.

As the year draws to a close, take time to review your financial situation and implement strategies that will benefit your finances before December 31. Actively managing your finances and planning for the future can provide a sense of empowerment and deliver rewards that last a lifetime.

Teri Parker is a certified financial planner and vice president for the Riverside office of CAPTRUST Financial Advisors. She has practiced financial planning and investment management since 2000. Contact her via email at Teri.parker@captrust.com.