What’s the Most Tax-Efficient Way to Give? It Depends on Your Age

In our latest video, Daniel Andersen, CFP®, and Trevor Stone, CFP®, EA, wealth advisors at Parkshore Wealth Management, break down two of the most tax-efficient ways to give to a charity you care about, and why cash may not be the smartest way to do it. Watch the video below, or keep reading for the highlights.

Why Cash Isn’t Always the Most Efficient Way to Give

Almost everyone who gives to a charity gives the same way: writing a check, dropping cash in a basket, or handing over clothes and household items they no longer need. All of that counts, and it all helps. But there are often more tax-efficient ways to support the same cause.

Daniel and Trevor break the more efficient strategies into two groups: one for donors under age 70½, and one that opens up once you cross that threshold.

Under 70½: Give the Stock, Not the Cash

If you own stock that has grown in value and that you’ve held for more than a year, giving the shares directly to a charity can be more efficient than selling the stock first and donating the proceeds. Say you bought stock at $20 a share, and it is now worth $100. If you sell it yourself to fund a cash gift, you realize that $80 per share of gain and owe capital gains tax on it, before the money ever reaches the charity.

Give the shares directly instead, and the outcome changes. You can generally deduct the full $100 fair market value, the same as if you had donated a sweater or a dresser worth $100, and the unrealized gain moves with the shares to the charity. Because charities are tax-exempt, they can sell the stock and keep the full $100 without owing capital gains tax on the appreciation. You get the deduction, the charity gets the full value, and nobody pays tax on the gain.

This strategy depends on the stock being worth more than you paid for it. If a holding has lost value, selling it and donating the cash, so you can claim the loss on your return, is typically the more efficient route.

Reinvesting Resets Your Cost Basis

There is a second benefit to gifting appreciated stock instead of cash: It frees you up to reinvest. Rather than writing a check from your bank account, you can donate the appreciated shares and then use the cash you would have given to buy back into that position or diversify into something else entirely. Either way, your new shares carry today’s purchase price as their cost basis, not the original, lower basis on the shares you gave away.

This can be especially useful for anyone holding a concentrated position from a former employer or a stock that has simply outperformed the rest of their portfolio. Selling that position outright can mean a large, unwelcome tax bill. Gifting the appreciated shares and reinvesting lets you reduce that concentration and reset your basis in the process.

70½ or Older: Give Directly From Your IRA

Once you turn 70½, an additional strategy becomes available: the qualified charitable distribution. A QCD is a direct transfer from your IRA to a qualifying charity. For 2026, you can direct up to $111,000 per person, or $222,000 for a married couple, and that amount is excluded from your taxable income entirely. (Note that the limit is indexed for inflation and can change from year to year.)

The key word for a QCD is “direct.” If you withdraw the money from your IRA first and then write a check to the charity, the withdrawal is taxable income, even though you gave every dollar away. Route the transfer straight from the IRA to the charity instead, and it is never counted as taxable income in the first place. If you are subject to required minimum distributions, a QCD can also count toward satisfying that year’s RMD.

A QCD must go directly from a traditional, rollover, or inherited IRA to an eligible 501(c)(3) public charity. Donor-advised funds (DAFs) and private foundations do not qualify to receive a QCD, so this strategy works alongside, but is distinct from, charitable strategies using DAFs.

Why a QCD Matters If You Don’t Itemize

A QCD can be especially valuable for retirees who have paid off their mortgage and no longer itemize deductions on their tax return. Normally, giving cash to charity in that situation doesn't produce any tax benefit, since the standard deduction already covers more than an itemized return would. A QCD sidesteps that problem: Because the money never counts as taxable income in the first place, you get the tax benefit of giving whether you itemize or not.

Choosing the Strategy That Fits You

Which approach makes the most sense for you—appreciated stock, a QCD, or simply giving cash—depends on your age, what you hold, how you file your taxes, and your goals. Ideally, your charitable giving strategy should work with your overall financial plan. As with any tax strategy, the details matter, and a conversation with your financial advisor before you give could help you capture the full benefit.

If you would like help thinking through the most tax-efficient way to support the causes you care about, we invite you to schedule a conversation with a financial advisor at Parkshore Wealth Management.

This material was written in collaboration with artificial intelligence (Claude) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.

Parkshore Wealth Management is an independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Daniel Andersen, CFP®, a member of NAPFA, the country’s leading professional association of fee-only financial advisors.