Most people think of charitable giving as a way to support causes they care about, and of course, that’s true. But giving can also play a meaningful role in year-end tax planning. The right approach to charitable giving can naturally align with your broader goals. 
As a retirement planner in Northbrook with over 30 years of tax planning experience, I specialize in helping pre-retirees and retirees create meaningful charitable giving strategies that can help shape both your current tax bill and your long-term estate plans.

Below, we break down some of the most searched questions about charitable giving and taxes, along with ideas you can explore before December 31.
1. “Can charitable giving actually lower my taxable income?”
In many cases, yes. Charitable gifts can reduce your taxable income, especially when timed toward the end of the year. Here are some of the more common approaches:  


Cash gifts: If you itemize, these may reduce your taxable income, especially in years when other deductible expenses already bring you close to the itemizing threshold.




Donating appreciated investments: Consider donating stocks or mutual funds that have increased in value over time. Instead of selling and paying capital gains tax, you donate the shares directly. You avoid the gain, and the charity receives the full value.


Qualified Charitable Distributions (QCDs): If you’re age 70½ or older, you can give directly from your IRA to a qualified charity. This can count toward your required distribution and is excluded from taxable income. QCDs often help retirees who are trying to manage their tax bracket or Medicare-related surcharges.


2. “Why do people donate appreciated stock instead of cash?”
This strategy often arises, especially in late fall, when people begin to think about taxes. When you donate appreciated stock or mutual fund shares you’ve held for more than a year, two things happen: 


You avoid the capital gains tax you’d pay if you sold the investment.


The full fair market value may be used for a deduction if you itemize your deductions.


As you start your year-end tax planning, this approach can help rebalance a portfolio while minimizing tax liabilities.
 3. “How do donor-advised funds help with taxes?” 
Donor-advised funds (DAFs) have become incredibly popular because they’re flexible. You can contribute now, potentially receiving a deduction, and decide later which charities will receive the grants. A DAF can be helpful when: 


You have a high-income year (bonus, RSU vesting, business sale)


You’re planning a Roth conversion


You want to give, but aren’t sure which charities yet


You want to simplify family giving


For many families, it becomes a way to teach younger generations about giving while keeping recordkeeping easy.
4. “Can charitable giving really reduce estate taxes?”
Charitable giving can significantly impact the size of your taxable estate and the manner in which your assets are transferred to the next generation. While federal estate tax thresholds shift over time, and many families remain below those limits, higher-net-worth households may still encounter estate tax exposure, especially as laws evolve. 
That’s why charitable planning often becomes part of a broader estate strategy. By making lifetime gifts to charity, naming a charity as a beneficiary on certain accounts, leaving assets to charity in your will, or incorporating charitable trusts into your estate plan, you may be able to reduce the portion of your estate that could be subject to taxation. These approaches also allow you to support causes that matter to you while shaping how your wealth will eventually be passed on. 
As a Northbrook retirement planner, we can collaborate with your estate attorney to develop charitable strategies that naturally align with your long-term objectives, striking a thoughtful balance between giving, family needs, and tax planning.
5. “What is a charitable remainder trust, and why do people use them?”
A charitable remainder trust (CRT) is often used when someone wants to give to charity but also needs income from the asset they plan to donate. It’s beneficial when the asset, usually real estate, company stock, or highly appreciated investments, has grown significantly in value over time. 
People often explore CRTs during significant life transitions, such as approaching retirement, selling a business, reducing exposure to a legacy stock holding, or managing a significant one-time tax event. When coordinated with financial and tax professionals, a CRT becomes both a giving strategy and a tax-aware planning tool.
Instead of selling the asset outright and triggering a large tax bill, you transfer it into the trust. The trust then sells the asset, invests the proceeds, and pays you (or another beneficiary you choose) an income stream for a set period or for life.
Why is this attractive from a tax standpoint? 


You avoid immediate capital gains tax. If you sold a highly appreciated asset yourself, you’d owe capital gains tax on the increase in value. When the asset is transferred to a CRT and sold inside the trust, the sale generally does not trigger immediate capital gains. This means the full sale proceeds can be reinvested, rather than being reduced by taxes upfront.




You receive a partial charitable deduction. Because the charity will receive the remaining assets after the trust ends, the IRS allows a charitable deduction in the year you set up the trust. The deduction amount depends on factors such as your age, the trust payout rate, and the current IRS interest rate assumption (the “7520 rate”). While it’s not a deduction for the full value of the asset, it can still meaningfully offset taxable income in the year of the gift.


You may reduce the size of your taxable estate. Once the asset is transferred into the CRT, it’s no longer considered part of your taxable estate. For higher-net-worth households, this can help reduce potential estate tax exposure in the future, especially if federal exemption levels decrease.




You still receive income. This is one of the biggest reasons people choose CRTs. Even though the asset will ultimately go to charity, you’re not giving up financial stability. Instead, you convert the asset into an income stream you can use during retirement, after selling a business, or while diversifying out of a concentrated stock position.




A charity receives the remainder at the end of the trust. When the trust term ends, either after a set number of years or at death, the remaining assets pass to the charity or charities you selected. This allows you to support causes that matter to you while integrating charitable intent into your financial plan.


6. “What should I think about before making a year-end charitable gift?”
Year-end giving can be meaningful, but it also comes with logistical deadlines to consider. If you’re planning to give before December 31, here are a few things to consider:
Year-End Charitable Giving Checklist: 


Confirm the charity is IRS-qualified


Complete all gifts before December 31 (transfer dates matter)


Start stock transfers early: brokerages get busy


Consider appreciated securities instead of cash


Evaluate whether a donor-advised fund makes sense


If you’re 70½+, look into QCDs


Keep all documentation for tax filing


A quick check-in with your financial advisor in Northbrook can help you avoid last-minute complications.
8. “Where does charitable giving fit into my overall retirement plan?”
Giving can be tied into retirement planning in several ways: 


Managing taxable income in retirement


Offsetting large required distributions


Supporting causes you care about


Reducing future estate tax exposure


Creating teaching moments for children and grandchildren


If you’d like to explore how charitable strategies might fit into your year-end planning, Fisher Financial Group, LLC can help you think through your options and connect them to your broader financial goals.  Contact us to discuss your charitable giving strategies and explore potential opportunities for your philanthropic endeavors.
          

About the author

Dan Fisher is a Registered Financial Consultant (RFC) and Federal Retirement Consultant (FRC) who has spent more than three decades guiding retirees and pre-retirees through tax-smart investing and income planning. As the founder of Fisher Financial Group, he brings a practical approach to helping clients make informed choices about their retirement.