Most families give because something matters to them – their church, their community, a cause tied to their values. The tax benefits aren’t the reason that you give, but they do help your generosity go further.
As you enter retirement, the tax system can start to influence your giving in new ways. RMDs begin. Social Security taxation can increase if your income rises. Long-held investments may have large unrealized gains. This means the way you give can either help your long-term plan or make things harder without meaning to.
This guide is a high-level survey of some of the main tax-efficient charitable giving strategies available in retirement. You do not need to become a tax expert. You only need to understand which tool solves which problem – and when it makes sense to use them.
Why Tax Efficiency Matters More in Retirement
Retirement changes your tax picture. The following are a few items that drive why tax-efficient giving becomes more important than it was during your working years.
1. RMDs create taxable income whether you need the money or not
Beginning at age 73, required minimum distributions (RMDs) from IRAs and other pre-tax accounts must come out. These withdrawals are taxed as ordinary income. If you already give to charity, there are smarter ways to meet your RMD than withdrawing cash, paying tax, and then writing a check.
2. Higher income affects more than just your tax bracket
In retirement, every extra dollar of taxable income can have ripple effects. It can increase how much of your Social Security benefit becomes taxable. It can push you into higher Medicare premiums through IRMAA – which can add hundreds or even thousands of dollars a year. In addition, it can trigger phaseouts or limits on deductions and credits. Smart charitable strategies help you keep income off your return, which can soften these pressure points and create more room in your retirement budget.
3. Many retirees hold appreciated investments
If you have stocks, ETFs, or mutual funds with significant appreciation, giving them directly[Using Appreciated Securities to Maximize Your Charitable Impact] can eliminate capital gains taxes and increase the impact of your gift.
Qualified Charitable Distributions (QCDs): Often the Most Powerful Tool for Retirees
If you have an IRA and you’re at least 70½, a Qualified Charitable Distribution (QCD) is often the most tax-efficient way to give.
For tax year 2025, a QCD lets you transfer up to $108,000 per person per year directly from your IRA to a qualified charity. This figure is estimated to be $115,000 for 2026. The distribution never shows up in your taxable income, and once you reach age 73, it can satisfy all or part of your RMD.
Why QCDs are effective:
• They reduce taxable income dollar-for-dollar
• They can lower the taxation of Social Security
• They can help prevent income-related Medicare premium surcharges (IRMAA)
• They allow you to give pre-tax dollars rather than after-tax dollars
Let’s imagine a simple example:
Let’s imagine you plan to give $10,000 this year. If you write a check, you need to withdraw more than $10,000 from your IRA to cover the taxes on that withdrawal. With a QCD, the $10,000 goes straight from your IRA to the charity, and it never shows up in your income. The charity receives the same gift, but your tax picture is cleaner.
QCDs must go directly from an IRA to a charity. They cannot fund donor-advised funds, private foundations, or most giving accounts.
Sometimes you want to donate appreciated investments, but the charity cannot accept them. Or you want to make one contribution now and direct gifts over several years. A donor-advised fund can help with both.
Donating Appreciated Securities: A Smarter Alternative to Cash
If you hold appreciated investments in a taxable account, giving those shares directly is often more effective than giving cash.
Here’s why this approach often works better than cash:
- You avoid capital gains taxes on the appreciation
- The charity receives the full market value
- You may receive an itemized deduction for the full value
- It can help reduce concentrated positions in your portfolio
Let’s take another simple example:
Ten years ago, you bought a stock for $10,000 and now it’s worth $25,000. If you sell the shares first, you would owe capital gains tax on the $15,000 of growth, and your gift would be smaller. If you donate the shares directly instead, the charity receives the full $25,000, and you avoid the tax entirely. The gift costs you the same, but it goes further.
For many families, this is the cleanest way to give without worrying about surprise tax bills.
This approach can also support other planning goals, such as:
- Rebalancing a portfolio
- Reducing oversized stock positions
- Giving to charities that can accept securities
- Funding a donor-advised fund
For many families, this raises a practical question: what if your favorite charity can’t accept stock gifts, or what if you want to make one larger gift now but send the money to charities gradually? This is where donor-advised funds can help.
Donor-Advised Funds: Flexible and Organized Giving
A donor-advised fund (DAF) is one of the simplest ways to organize your giving, especially when your charitable plans stretch over several years. You contribute assets to the account – often appreciated securities – and receive a potential tax deduction that year and recommend grants to charities over time.
This can be helpful if you have a high income year, expect your income to fluctuate, or if you want to ‘pre-fund’ several years of giving during a year when deductions matter more.
A DAF can be helpful when:
1. You want to give appreciated investments, but your preferred charities can’t accept them
Many smaller organizations cannot process stock gifts. A DAF can act as the intermediary.
2. You want to simplify record-keeping
One contribution receipt. One granting platform. A single place to track all your gifts.
3. You want to separate the timing of the deduction from the timing of the gift
You can contribute this year – for example, during a high-income year – and direct gifts next year or over many years.
4. You want to involve adult children or grandchildren
It gives you a structured way to model generosity without opening up your full financial picture. This fits well with families who want to pass down generosity[How to Talk with Your Adult Children About Your Charitable Priorities] without exposing personal details.
Comparing the Three Most Common Tools
Each option solves a different problem:
• QCDs reduce taxable income and satisfy RMDs
• Appreciated securities avoid capital gains and are ideal for taxable accounts
• DAFs provide flexibility, consolidation, and timing control
A few patterns:
• If your goal is to reduce RMD income – QCDs often come first.
• If you want to avoid capital gains – appreciated investments are often best.
• If you want to give larger gifts over time – a DAF can help you pace your generosity.
• If you want to simplify your giving – a DAF provides structure.
These strategies work differently for every family. If you’d like to talk through what makes the most sense for your situation, schedule a 20-Minute Clarity Call and we’ll map it out together.
Charitable Trusts: Useful but Not for Everyone
Most families never need a charitable trust. But when assets are highly appreciated, gifts are large, or estate complexity is rising, a charitable trust may be worth exploring.
There are three common types:
1. Charitable Remainder Trusts (CRTs)
You donate appreciated assets to a trust, avoid immediate capital gains, receive income for life or a fixed period, and leave the remainder to charity.
2. Charitable Lead Trusts (CLTs)
The trust pays income to charity for a set period, and the remaining assets pass back to you or to your heirs.
3. Charitable Gift Annuities (CGAs)
You make a gift to a charity and receive fixed payments for life. Whatever remains goes to the charity after your death.
These tools can be helpful, but they require administrative work, long-term commitments, and careful planning. Complexity should serve your purpose – not the other way around.
Navigating the Tension: Giving Wisely Without Jeopardizing Your Security
Many people in retirement feel torn between generosity and caution. They want to give to causes that matter, but they also want to protect retirement spending, healthcare needs, and their family.
The right strategy balances:
- your giving goals
- your tax picture
- your retirement income needs
- your comfort with complexity
There are no perfect decisions. There are only tradeoffs that become clearer once your purpose is defined.
Start With Your Purpose, Then Choose the Strategy
Tax rules matter. Tools matter. But the starting point is always your purpose – what you want your giving to accomplish and how it fits with the rest of your life.
Once your purpose is clear, the technical choices become easier. You can match the right tool to the right goal and give in a way that supports both your values and your long-term security.
Common Questions
It’s normal to feel unsure about the details when you’re trying to give wisely in retirement. Here are a few of the questions families often ask as they sort through their options.
1. Is it better to give cash or appreciated investments?
Often, donating appreciated investments make your gift go further because you avoid capital gains tax and the charity receives the full value. You can read more about how this works in our guide to using appreciated securities
2. Can I use a QCD even if I’m not taking RMDs yet?
Yes. You can start QCDs at age 70½, even though RMDs begin later. A QCD can lower your taxable income and help keep your future RMDs smaller. For a deeper walkthrough, see our article on QCDs.
3. What if my favorite charity can’t accept stock gifts?
A donor-advised fund can act as the intermediary. You donate the appreciated shares to the DAF, and then recommend a grant to the charity in cash. We explain how DAFs work and when they make sense here.
4. Do charitable gifts reduce my Medicare premiums or IRMAA?
They can, but only indirectly. Charitable strategies that keep income off your tax return – like QCDs – can help you avoid crossing the income thresholds that trigger higher Medicare premiums through IRMAA. The gift itself doesn’t lower premiums, but the way you give can make a meaningful difference.
If you want a clearer picture of what meaningful, sustainable giving looks like for your family, our workbook can help. Download Giving With Purpose to get started.
