The Tax-Smart Way to Give Back

☕ Good morning SenseMakers!

For many business leaders and executives, giving back is not just about generosity, it is about purpose. You have worked hard to create financial success, and with that success comes the opportunity to make an impact on the world around you. 

Being philanthropic does not mean you should ignore the tax implications of how and when you give. 

The most strategic givers know that the right structure allows them to do more good, both for the causes they care about and for their own long-term plan.

That is where donor advised funds come in.

The Smartest Way to Give While You Are in Your Peak Earning Years

A donor advised fund is an efficient, flexible, and tax savvy way to be charitable during high income years. Think of it as a dedicated giving account at a public charity. You contribute now, receive an immediate tax deduction, and then recommend grants to nonprofits over time.

This structure lets you front load your charitable giving in a year when your income, and your tax rate, may be at its highest, while giving you the flexibility to distribute funds later on your timeline. 

For executives facing large bonuses, stock vesting events, or liquidity from a business sale, this can smooth out tax exposure and amplify long-term impact.

For 2025, cash gifts to public charities, including donor advised fund sponsors, are deductible up to 60 percent of AGI. Contributions of long-term appreciated assets such as stock, real estate, or pre liquidity shares are capped at 30 percent of AGI with a five year carryforward. 

When you contribute appreciated stock held longer than one year, you can avoid the capital gains tax you would owe if you sold the shares yourself, while still deducting their full fair market value.

You give more to charity and less to the IRS.

Why I Am Personally Passionate About This

Philanthropy has always been more than a line item for me. I serve on several nonprofit boards, and I have seen how strategic giving changes lives, not only for those receiving support but also for donors who feel deeply connected to the causes they believe in.

I also see how often high income earners overlook tools like donor advised funds. Many professionals never bring them up, and families miss the chance to create meaningful impact while optimizing taxes. 

Among the wealthiest families and institutions, donor advised funds are a core part of giving strategies because they work. They simplify administration, allow for anonymity when desired, and create a structured, tax efficient path for sustained philanthropy.

A Real World Example

Imagine a major liquidity event this year, perhaps a business sale or a large RSU vest. You donate 500,000 dollars in long-term appreciated stock with a 100,000 dollar cost basis into a donor advised fund before the transaction closes.

• Capital gains avoided: 400,000 times 23.8 percent is about 95,200 dollars
  

• Deduction this year, 30 percent of 1.5 million AGI: 450,000 dollars
  

• Carryforward for five years: 50,000 dollars
  

• Tax value at a 37 percent rate: about 185,000 dollars in total deductions

You reduce taxable income in a high bracket year and set up a multi year giving pool that can support the nonprofits you care about for years to come.

Beyond Donor Advised Funds, Other Philanthropic Paths

While donor advised funds fit most modern professionals, they are not the only option.

• Private foundations allow for maximum control and visibility but come with higher administrative costs, public reporting, and lower AGI deduction limits. They make sense for families that want to run large scale or enduring charitable programs.
  

• Charitable remainder trusts let you convert a concentrated asset into income while deferring gains, with the remainder eventually benefiting charity.
  

• Qualified charitable distributions work well for those over age 70 and a half. You can give up to 108,000 dollars in 2025 directly from an IRA to a qualified charity, reduce AGI, and satisfy required minimum distributions. Note that QCDs cannot fund donor advised funds.

Each option has its place. For many high income earners who want generosity and efficiency, the donor advised fund remains the simplest and most powerful.

Why 2025 Is a Unique Window for Strategic Giving

Beginning in 2026, new rules add a 0.5 percent of AGI floor for itemized charitable deductions and introduce a small non itemizer deduction. 

For those who give at scale, that makes 2025 the year to front load philanthropy while the full deduction remains available.

Establishing or adding to a donor advised fund before year end is a clean way to make that happen. You capture this year’s deduction and keep flexibility to deploy funds later.

The Bottom Line

Giving back should be meaningful and strategic. A donor advised fund lets you align charitable goals with your financial plan, make an impact now and for years to come, and keep your taxes working in your favor.

If you are heading into a high income year, considering a liquidity event, or want to make generosity a more deliberate part of your wealth plan, it is time to have the conversation. 

Let us explore how a donor advised fund or other charitable structures can help you maximize both your giving and your financial efficiency, and build a legacy that makes a difference.

Listen Next, Then Take Action

If this topic resonates, listen to Episode 26 of the Making Sense of Your Money podcast, How Philanthropy Rewires a Life, where I speak with Melanie Davis of CityTeam about real transformation, why donors value measurable results, and how flexible giving vehicles like donor advised funds help you act when the right cause appears. It is a practical and inspiring conversation that shows how thoughtful structure turns generosity into lasting change.

👉 Watch or listen here:

Making Sense of Donor Advised Funds

For high earning professionals, a donor advised fund bridges generosity and strategy. It allows you to contribute during your highest income years, secure an immediate deduction, and give thoughtfully over time. 

Whether your goal is to reduce this year’s tax bill, create long-term charitable impact, or start a family tradition of giving, a donor advised fund offers flexibility and clarity.

The key takeaway: you do not need to be ultra-wealthy to give meaningfully — you simply need a plan. Thoughtful structure can turn your success today into lasting impact tomorrow, helping you live out your own version of a rich life.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Security and Advisory Services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC The information contained in this e-mail message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.