Tax planning strategies that optimize charitable giving

Photo of a business meeting

Local experts weigh in on how philanthropy can offset tax burdens after a year of volatility

Each year, donors in the United States contribute more than $450 billion to charities in our country and more than half of that is given by individuals. While the impact of these gifts can be seen right here in our community year after year, there are also tax benefits for the donors making those gifts.

As we enter the final months of 2022, you might be considering ways to reduce your tax burden at the same time you are receiving reminders from your favorite local non-profits encouraging your gift before the end of the year. The good news is you can accomplish both through a variety of tax-advantageous giving strategies that will support your favorite non-profits.

Strategies range from “bunching” multiple years of contributions into a donor advised fund to making donations of highly tax-efficient gifts of closely held business shares, real estate, oil and gas royalty interests, and other appreciated assets. For those 70 ½ and above, contributions from IRA distributions are an increasingly popular way to give to your favorite charitable causes while reducing your taxable income.

One of the most flexible and user-friendly financial tools for donating a variety of assets is a Donor Advised Fund (DAF). DAFs are qualified charitable funds sponsored by an organization, like North Texas Community Foundation, that can be invested for growth. DAFs are convenient tools offering an immediate tax benefit while providing you with the flexibility to make grants over time to your favorite nonprofits. A DAF is like a charitable checking account. Not only can cash gifts be contributed to a DAF, they can also accept a wide range of assets.


Bunching cash donations into a DAF provides a much higher amount in itemized deductions in one tax year because it is essentially front-loading several years’ worth of deductions into one year. This makes it worth taking the itemized tax deduction instead of the standard deduction in the current year. By bunching the deductions over alternating years, you can maximize the deduction. Donors who use this strategy will often donate on January 1st and then again on December 31st. Using the DAF provides donors with the opportunity to either maintain the regular installments of gifts they typically make to their favorite non-profits or set aside funds to make larger gifts at a later date.


Gifts of appreciated assets held for many years may be especially valuable as the donor is able to claim the full market value of the asset as a charitable deduction while also avoiding the capital gains taxes that would be due if the asset was sold prior to the contribution. If donors do not have highly appreciated securities to contribute, as they may have in other years, appreciated assets such as real estate, oil and gas royalty interest, and life insurance may be viable appreciated assets in an otherwise down market. Since not all non-profits have the capacity to handle gifts of appreciated assets, North Texas Community Foundation can help facilitate these gifts, simplifying the process for the donor and intended benefiting organization.


The sale of a portion or entirety of a business leads to some of the greatest tax-saving opportunities a donor may have in their lifetime, and gifting those shares into a donor advised fund, prior to sale, is a simple and straightforward process to capture those benefits. By gifting closely held business shares, a donor is able to:

  • Maximize income tax deduction equal to the fair market value of the gift, up to 30% of your adjusted gross income provided the interest is donated prior to executing a binding sale agreement
  • Reduce or eliminate capital gains tax on the appreciation of the gifted portion by gifting before the sale
  • Reduce potential tax liability by removing these assets from your estate
  • Achieve a range of charitable goals by giving through a donor advised fund over time


Individual retirement account (IRA) assets are integral to a good retirement strategy, and they are also among the most tax-efficient ways to make charitable gifts for those who have reached age 70 ½. For those who have accumulated assets beyond their retirement needs, there are multiple ways to avoid unintended tax consequences.

After age 59 ½, a taxable distribution can be taken from a traditional IRA without penalty. That can be used in any way, including contributing the distribution to charity. If you itemize your charitable deductions, then donating the IRA distribution should provide a charitable deduction that offsets the associated income.

Furthermore, after reaching the age of 70 ½, individuals can make IRA distributions directly to charities, up to $100,000 per taxpayer per year. These qualified charitable distributions (QCDs) provide several tax advantages:

  • QCDs are excluded from taxable income. For those clients who do not itemize deductions, QCDs may provide greater tax savings than cash gifts.
  • Beginning at age 72, QCDs count toward a client’s required minimum distribution (RMD).

Individual circumstances will inform the best end-of-year giving approach for each donor. Now is the time to call upon your trusted tax, legal, financial, and charitable giving advisors to achieve the most impactful outcomes for you and the community.

Kelly Hein, CPA, is a Partner at FORVIS and has more than 25 years of experience serving high-net-worth individuals with income tax compliance, planning and estate tax structuring and business interests across a variety of industries. Kelly is a member of the American Institute of CPAs and Texas Society of Certified Public Accountants.

Amanda Lewis, CFRE, has over 18 years of experience in non-profit fund development. As Director of Charitable Gift Planning for North Texas Community Foundation, Amanda works hand-in-hand with professional advisors to develop and manage custom charitable giving plans for their clients.

Originally published in the Fort Worth Report.


Have Questions? Let's Chat.

Together, we can cultivate a more vibrant and resilient community where all North Texans can thrive.