In the last post, I wrote about when a Roth conversion helps and when it does not. This time, I want to look at another tax-related question.
If charitable giving is part of your plan, where should the gift come from?
A lot of people focus on how much they want to give and which causes they want to support. Those priorities should always come first. But the source of the gift can still matter. The charity may receive the same support either way, while the donor’s tax result may differ. Here is a simple place to start:
| If the primary goal is… | The source that often deserves the closest look is… |
| Simplicity | Cash |
| Reducing capital gains exposure or a large position | Appreciated taxable investments |
| Lowering taxable income or reducing RMD pressure | Traditional IRA through a qualified charitable distribution, if eligible |
This table is a starting point, not a rule. Different goals can lead to different good answers. The right answer depends on your age, your tax picture, the assets you own, and what you are actually trying to accomplish.
Why This Question Matters More Than Many People Realize
The rules around charitable deductions became more nuanced in 2026. Non-itemizers can deduct up to $1,000 of qualifying cash gifts, or $2,000 on a joint return, while itemizers generally can deduct charitable contributions only to the extent they exceed 0.5% of AGI.
A charitable gift is more than a decision to be generous or to support a cause that matters to you. It also involves deciding where the gift should come from.
You can give the same amount to the same organization while creating very different tax consequences, depending on where the gift comes from.
That does not mean every gift needs to be tax optimized. Simplicity matters too. But if you are already giving, it makes sense to ask whether the way you are funding the gift still makes sense. Gifts of appreciated property to a qualified organization are often deductible at fair market value, subject to the applicable rules and limits, and qualified charitable distributions (QCDs) can be excluded from income as long as you meet the requirements.
When Cash May Be the Right Source
Cash is often the default. And sometimes that is perfectly fine.
If your giving is modest, routine, or primarily about simplicity, you may decide to write a check or give cash. It is easy. It is familiar. It gets the job done without much friction.
That matters. Not every charitable decision needs to become part of a tax strategy. If the gift is routine, the amount is modest, and simplicity helps you stay consistent, cash may still be the best answer.
But cash is also the easiest way to give automatically, without ever asking whether another option might make more sense.
When Appreciated Stock May Be Better
If you hold appreciated investments in a taxable account, that account may deserve a closer look before you give cash.
Why? Donating appreciated stock can sometimes help you support the charity without first selling the asset, recognizing the gain, and then giving the after-tax cash. IRS guidance says you can generally deduct the fair market value of donated property given to a qualified organization, subject to the applicable limits and adjustments.
Here is a simple example. Suppose you want to give $10,000 to charity. You currently own 100 shares, each worth $100, and your cost basis is $30 per share. If you donate the shares directly instead of selling them first and then giving cash, you may avoid recognizing the $7,000 embedded gain. At a 15% federal long-term capital gains rate, that could mean about $1,050 of avoided federal capital gains tax. At a 20% rate, that could mean about $1,400. State taxes could further increase the benefit. If you itemize and meet the deduction rules, you may also be able to deduct the fair market value of the gift, subject to the applicable limits.
That does not change your charitable intent. It changes the tax friction associated with the gift and, in some cases, may allow you to give the same amount at a lower after-tax cost.
This approach can be especially relevant if you have held the investment for a long time, if the embedded gain is meaningful, or if you were already planning to reduce the position. It can also help you give to charity while reducing a concentrated holding in a more tax-efficient way.
In that situation, the question is not only, “Do I want to give?” It is also, “Do I want to give in a way that may help me avoid realizing capital gains first?”
When a Qualified Charitable Distribution May Be the Right Answer
For some donors, a traditional IRA may be the most strategic source for the gift.
This consideration becomes especially important when the donor is eligible to make a qualified charitable distribution, or QCD. Taxpayers age 70½ or older can make a QCD directly from an IRA to a qualified charity, and the 2026 annual limit is $111,000. If you meet the applicable rules, a QCD can also count toward an RMD for the year.
In the right situation, charitable giving from an IRA can help reduce taxable income. For those already subject to required minimum distributions, it may also help reduce RMD pressure.
That can matter more than a deduction.
That matters because, in general, you exclude a qualified charitable distribution from income rather than claim it as a charitable deduction. In the right situation, that lower-income result may do more than reduce this year’s tax bill. Excluding QCDs from income may improve tax calculations based on either AGI or MAGI. For example, medical expenses are generally deductible only to the extent they exceed 7.5% of AGI. Keep in mind that you also cannot claim a charitable contribution deduction when you exclude a QCD from income.
A lower-income result may affect more than this year’s tax bill. In some cases, it may also reduce some of the pressure that large pre-tax accounts can create later. That is an added benefit, not the only reason to consider giving from an IRA.
Sometimes, the right way to fund a charitable gift is through an IRA using a qualified charitable distribution. Sometimes it is not. But it is important enough not to overlook.
The Better Question to Ask
This logic explains why I do not think the right question is simply:
Should I give from cash, stock, or an IRA?
The better question is:
What am I trying to accomplish with this gift?
If your main goal is simplicity, cash may be the right answer.
If your main goal is reducing capital gains exposure or a concentrated stock position, appreciated taxable investments may deserve a closer look.
If your main goal is lowering taxable income or reducing tax exposure from pre-tax retirement accounts, charitable giving from an IRA may be the better place to start, assuming you are eligible for a qualified charitable distribution.
The right answer is not universal. It depends on the problem you are trying to solve.
Should I “Bunch” My Charitable Deductions?
If your giving varies from year to year, or if you are close to the line between itemizing and taking the standard deduction, timing may matter, too. In some cases, bunching multiple years of gifts into one year can improve the tax value of the deduction, especially now that charitable deductions for itemizers in 2026 generally only count to the extent they exceed 0.5% of AGI.
If you have a long-term giving strategy, a donor-advised fund (DAF) can help you bunch donations and, in turn, your itemized deductions. It allows you to make a charitable contribution and claim the deduction in one year while recommending grants to charities over time.
What People Often Get Wrong
The most common mistake is not giving from the “wrong” type of account in some absolute sense.
The more common mistake is giving automatically in the easiest way, without ever asking whether another approach might provide greater benefit.
That can look like:
- Writing a check while holding appreciated taxable investments
- Giving from a taxable account while allowing large IRA balances to continue to increase, creating greater future tax costs
- Focusing only on the deduction while missing the broader income effect
- Assuming every charitable dollar works the same, no matter where it comes from
The gift may be the same. The tax result may not be.
Who Should Look More Closely
This question deserves the closest look if you give regularly, hold appreciated taxable investments, or have meaningful pre-tax retirement assets and want your giving to fit more intentionally into your overall tax planning.
It becomes especially important if you are retired or approaching RMD years, when decisions about where the gift comes from can affect not only this year’s tax bill, but also your future tax burden.
It is also worth a closer look if you have never seriously compared cash, appreciated stock, and charitable giving from an IRA, or if you have never asked whether a qualified charitable distribution might be the most strategic option available to you.
The Bottom Line
Where the gift comes from will not change your generosity. And sometimes the simplest answer is still the right one.
But it may change the tax result.
That is the key takeaway.
Remember that the goal is not to optimize every gift. It is to make sure the default source you use still makes sense.
The charity may receive the same dollar amount of support regardless of where the gift comes from. The variable that changes is what that gift leaves behind in your taxable account, your pre-tax retirement account, or your future tax picture.
In other words, the gift may stay the same. What changes is what the gift leaves behind for you, and how much future tax burden can build up in large pre-tax accounts.
In the next blog in this series, I will look at another related question: why $100,000 of income is not all taxed the same way.
A Good Time to Take a Closer Look
If charitable giving is already part of your plan, this may be a good time to review where those gifts are coming from.
The goal is not to overcomplicate generosity. It is to make sure the way you are funding the gift still supports the rest of your plan.
If you would like help thinking through whether cash, appreciated stock, or a qualified charitable distribution makes the most sense for your charitable giving, you can schedule a conversation here.
Related Reading
- 2026 Tax Changes: What Actually Matters
- When a Roth Conversion Helps. And When It Doesn’t
- Supporting Women’s New Beginnings: Tax-Efficient Charitable Giving
- Navigating Taxes After a Big Life Change: A Guide for Women Starting Fresh
FAQs
What is usually the simplest way to give?
Cash is usually the simplest. For many routine gifts, simplicity may matter more than optimization.
When might donating appreciated stock be better than giving cash?
Donating appreciated stock may be worth a closer look if you hold taxable investments with meaningful gains and are already planning to support a charity. Gifts of appreciated property may allow you to avoid recognizing capital gains while still supporting the charity.
When might a qualified charitable distribution be the right answer?
A qualified charitable distribution may deserve a closer look when you are age 70½ or older and want to reduce taxable income or RMD pressure through charitable giving from an IRA. Once you meet the requirements, QCDs can count toward an RMD.
Does the charity receive less if I fund the gift differently?
Not necessarily. In many cases, the charity receives the same value. What changes is the tax effect for the donor.
What is the biggest mistake people make?
Many people give from the easiest source without ever asking whether another one might be more strategic.
Can a qualified charitable distribution go to a donor-advised fund?
No. A qualified charitable distribution must go directly to a qualified charity. A donor-advised fund is a separate giving vehicle and does not work the same way as a traditional charitable contribution.
Can I make a qualified charitable distribution from an inherited IRA?
In some cases, yes. If you are age 70½ or older, a qualified charitable distribution may be possible from an inherited IRA, but inherited-IRA rules are more technical and depend on the facts. Because of that, this is a question worth reviewing carefully before you assume the answer is yes.
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