For many families, the holiday season comes with familiar rituals: untangling last year's Christmas lights, decorating the tree and rediscovering ornaments we swore we'd organize "better next year."
Charitable giving should feel just as joyful and natural — but for many households, it's also a moment when good intentions collide with inefficient habits.
The biggest habit that needs a rethink? Donating cash when there are far better options.
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This year, with markets up and many investors holding appreciated securities, writing a check could be one of the least efficient ways to support your favorite causes.
The good news: With a little planning, you can stretch your generosity and reduce your tax bill.
Why Americans give — and why it matters now
Americans are remarkably generous people.
Whether it's supporting a food pantry, helping a local family in need or giving through a workplace program, most of us want to help — especially during the holidays.
Giving truly feeds our sense of purpose: The latest Bank of America Study of Philanthropy reports that 87% of affluent donors say charitable giving brings them joy.
But with inflation still squeezing households and many nonprofits seeing higher demand this year, the way you give matters. Advisers are urging clients not just to give — but to give smart.
Donating appreciated securities: The most powerful (and overlooked) tool
For many families, the most effective giving tool is also the simplest: donating appreciated stocks, ETFs, mutual funds, even cryptocurrency — instead of cash. Yet, most people overlook it.
When you donate long-term appreciated assets (held more than a year), you get two benefits at once:
- A charitable deduction for the full market value
- Complete elimination of capital gains tax
That combination is hard to beat.
A real-life example
Say you bought $10,000 worth of a stock 15 years ago that's now worth $50,000.If you sold it, you'd owe capital gains taxes on the $40,000 of growth.
If you donate the shares directly:
- You eliminate the entire $40,000 gain from taxation
- You receive a deduction for the full $50,000
- The charity gets the whole $50,000 — not a reduced after-tax amount
Financial adviser Keith Spencer, founder of Spencer Financial Planning in Spokane, Washington, often walks clients through this exact scenario.
"If the client wants to maintain the position," he says, "they can donate the shares and immediately repurchase them. The reset cost basis may significantly reduce long-term tax liability."
This "resetting" of cost basis is a hidden gem: It starts future gains at a higher level, trimming long-term tax drag in your taxable account.
A great fit for real-world portfolios
Many households already own perfect candidates for gifting:
- Old mutual funds with large gains
- Company stock from long careers
- ETFs bought during early-pandemic dips
- Automatic dividend reinvestment shares
- A handful of big winners in an otherwise diversified account
Even donating $1,000 of appreciated securities can be more efficient than donating $1,000 of cash.
Bonus: It helps rebalance your portfolio
If one stock or sector, such as technology, has grown too large, donating appreciated shares is a painless way to trim an overweight position — without triggering capital gains.
It's the charitable equivalent of replacing that one broken string of holiday lights: a small fix that makes everything else work better.
Meet the donor-advised fund (DAF)
For many families, the easiest way to combine tax benefits, flexibility and long-term planning is a donor-advised fund.
A DAF works like a "giving account" for your charitable life — you contribute now (cash or appreciated securities), take the deduction right away, and recommend grants over time.
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The biggest DAFs are Fidelity Charitable, DAFgiving360 (formerly Schwab Charitable) and Vanguard Charitable.
According to Ted Hart, author of The DAF Revolution, here are the reasons people use DAFs:
- Flexible and strategic. Contribute now, give later and time tax deductions to high-income years.
- Simple, One contribution can support many charities; the sponsor handles verification and paperwork.
- Accessible. Many DAFs have low or no minimums, opening the door to mass-affluent donors.
- Family-friendly. A natural tool for teaching kids and grandkids about giving and values.
- Powerful tax benefits. Immediate deduction plus tax-free growth inside the account.
Who uses DAFs?
With roughly 1.5 million to 2 million accounts in the U.S., DAFs are thriving across:
- Middle-income households
- Mass-affluent families
- Workplace-giving participants
- Corporate teams
- Community and faith-based donors
David Johnston, wealth management adviser at One Point BFG Wealth Partners in Parsippany, New Jersey, has seen DAFs reshape how families engage with philanthropy.
"DAFs are a very powerful tool for those who want the tax deduction today but also want to control the assets over time," he says. "Some of our clients involve their family in deciding where donations go. It's a great way to teach the values of philanthropy."
Five reasons to donate stock instead of cash
1. Bigger impact, same gift. Your charity receives the full market value — not an after-tax amount.
2. Eliminate capital gains tax. Avoid taxes on appreciated assets you donate directly.
3. Increase your tax deduction. Claim the full fair-market value of the stock or fund.
4. Keep your portfolio healthy. Reduce concentrated positions without triggering taxes.
5. Pair with a DAF for maximum flexibility. Fund your DAF with appreciated shares and give over time — on your schedule.
Why this matters now
The holidays are busy. Between decorating the tree, hosting family, shopping and trying to figure out why last year's wreath looks slightly more lopsided this season, charitable giving can feel rushed.
But a little planning — especially around appreciated assets and DAFs — can turn your holiday generosity into a smarter, more meaningful gift.
The bottom line
Giving generously is part of who we are. But giving smarter helps you support more causes, involve your family in meaningful conversations and reduce your long-term tax burden.
As a retirement coach at RetireMentors, I help clients understand the meaning of money in their lives — and for many retirees, that includes finding the right nonprofits to support, volunteer with, and champion.
Just because you're retired doesn't mean you want to stop giving. Many retirees find themselves wanting to give more, to deepen their impact and to make philanthropy part of their legacy.
With a few simple strategies — such as donating appreciated securities and using a DAF — you can do exactly that.
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