The Best and Worst Ways for Retirees to Give on Giving Tuesday

Cash donations are certainly the most convenient, but you could be overlooking significant tax advantages by taking the easy way.

Blocks sitting on the keyboard of a laptop spell out Giving Tuesday next to a red wooden heart.
(Image credit: Getty Images)

I have attended two charitable galas in the last two weeks. I missed the third because it was double-booked with the second. ’Tis the season.

At both events, I swiped my credit card on the way through the front door. Any donations, whether for auction items or pure donations, would be considered a “cash donation.” While this is certainly the easiest, it is almost never the best from a tax perspective.

As today is Giving Tuesday and we’re in the giving season, I thought I’d explain how to get the most tax bang out of your donations. Of course, your situation may differ. There are situations where unrealized gains are so large that it actually makes more sense to give first from a taxable investment account and then from an IRA.

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As a rule of thumb, here is the order of giving options, from the most tax-efficient to least.

1. Qualified charitable distribution (QCD): Giving from your IRA

The reason this is so powerful is that it reduces your gross income, not just your taxable income, as the others do. Medicare Part B and D premiums are based on modified adjusted gross income. The other significant benefit is that you don’t need to itemize deductions to get the tax benefit.

The biggest drawbacks of the QCD are the age minimum and the fact that the donation has to be given from an IRA. Traditionally, the QCD age was aligned with the required minimum distribution (RMD) age. As RMD ages have moved up, the QCD age has remained the same, at 70½. Assuming you meet that threshold, as mentioned above, the money has to come from an IRA and not from an employer-based plan. If you are planning to donate in 2024, the money would have to be rolled into an IRA by Dec. 31 this year.

2. Donations of shares

Directly to charity: Imagine a scenario where you bought Apple (AAPL) stock for $100,000, and it’s now worth $700,000. That $600,000 gap is an unrealized gain that will be taxed upon sale. Donating those shares directly to a charity means that you will not have to pay the taxes on the gain. You will be able to deduct the gross donation on your Schedule A, if you itemize deductions. Another benefit: The nonprofit you give the money to will not have to pay taxes on the gain.

To a donor-advised fund (DAF): Take the same situation as above, but you’re not sure you know who you want to give the money to, or when. If 2023 is a high tax year because you sold a home, business or anything else with significant tax consequences, you may want to take the charitable deduction in 2023 to offset that higher income.

The DAF allows you to take the donation in the year you make the initial contribution. In future years, you can make grants from the fund to the charities you elect. Those future grants have no tax impact.

To a charitable trust (CRT/CLT): A lot of acronyms, huh? These are trusts that you control but ultimately are for the benefit of the charities you designate. These are the vehicles we typically utilize for big dollars and big unrealized gains.

The specifics of these strategies will make up another article, but they are generally designed to create an income stream. The donation is made into a trust. In a CRT, you receive an income stream for life. What’s left at the end goes to charity. In a CLT, the income stream goes to charity during your life. The remainder goes to your beneficiaries. As I said, the tax consequences of these strategies can be significant, but they are more complicated to establish and maintain. You’ll need tax, legal and planning expertise. If you want specifics, feel free to contact me directly at or reach out through my company website,

3. Donation of cash (typically credit card or cash)

Cash is king … unless you want a big tax benefit. Cash will show up on your Schedule A just as a share donation would, but you don’t get to avoid the capital gains tax if you had to sell something to generate that cash.

According to the Tax Foundation, fewer than 14% of people itemize deductions. If you are part of the other 86%, your generosity will provide no tax benefit.

Before you make any donations …

Before you decide how to give, figure out how much you can afford to give. This is very much a situation where you want to put your own oxygen mask on first, to make sure you’ll be okay, before you strap the mask on someone else. A properly structured financial plan should have, if relevant, philanthropy as a stand-alone goal. That will help you determine how much to donate — and from where.

Happy Giving Tuesday!

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Evan T. Beach, CFP®, AWMA®
President, Exit 59 Advisory

After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification.  I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.