What advisors are saying about year-end giving

When the year draws to a close, taxpayers look to their professional advisors to ensure their year's financial activities align with their tax goals. Each individual's advice will be as unique to them as their financial situation. At the same time, there are often popular pieces of wisdom that arise during this time of year, especially around donating to charity. 

Charitable giving remains a critical component of any holistic financial wealth management strategy. Below, we share the recurring themes that come up in our discussions with industry leaders dedicated to helping people maximize the benefits of giving while making a greater impact.¹ 

Review what assets you’d like to give in advance of year-end 

In our conversations with advisors, one recurring theme was the importance of reviewing portfolios ahead of the year-end to identify assets that can be donated to charity. You don't want to reach December with the same plan you set in January without having at least reviewed it and considered what happened throughout the year. For example, has a windfall affected your tax liability and giving beyond the initial plan would boost your overall tax strategy? Has an investment underperformed that you expected to donate? 

Taking a careful look at your giving plan is particularly important for 2025 as new caps on deductions are set to be implemented for some donors starting in 2026, potentially altering their tax benefits. You’ll want to consult with your advisor about these changes and consider whether bunching more donations in 2025 will allow you to take advantage of current tax provisions before new caps are put in place. 

However, even in a year with no updates to tax law, donors should have their advisors review their portfolios and identify assets they would like to donate before the year ends so that they have time to enact the strategy that best suits their goals. 

Consider appreciated assets over cash

Advisors consistently emphasize the benefits of donating appreciated assets held for more than one year, such as mutual funds that have increased in value, either instead of or in addition to cash. By donating these assets directly, donors can reduce or eliminate capital gains tax on the appreciation, while also being eligible for a charitable deduction for the full fair market value of the asset. 

A donor-advised fund (DAF) streamlines the facilitation of these donations. With a DAF, donors can contribute appreciated assets to their accounts, then recommend grants to their favorite charities over time. This means donors can determine the assets that, when donated, would help them meet their financial goals without simultaneously needing to know the exact charities they want to support by the end of the year. It also makes it easier to give to multiple charities with the donation of one asset. 

Don’t forget complex assets

Our discussions with advisors highlighted the advantages of donating complex assets, such as private equity interests or privately-held stock, to charity. 

Liquidating and donating a complex asset can be complicated, and many nonprofits don't have the resources for accepting them. However, you can donate complex assets directly with a DAF and access the support of experts who will facilitate the valuation and donation process, ensuring you make the most of your charitable giving. 

Donations can rebalance a portfolio in a tax-effective way 

Another key theme we heard in our conversations was the use of charitable giving as a strategy for rebalancing a portfolio in a tax-efficient manner. 

Advisors suggest a part-gift, part-sale strategy to some of their clients. This approach allows for long-term appreciated assets to be donated in an amount that offsets the capital gains tax on the sale of other appreciated assets, while also claiming a charitable deduction for the donation. It can also help mitigate the tax impact of rebalancing to bolster the overall investment strategy. 

Conclusion: Optimize your giving with expert advice and a tax-effective giving vehicle  

Our conversations with professional advisors highlighted many strategies that both maximize impact and optimize tax plans. Donors should work closely with their professional advisors to identify which tactics suit their goals while finding a giving vehicle that best aligns with their overall financial plan. 

For most donors, a donor-advised fund is the ideal addition to their charitable giving. Whether opening a DAF is the start of your strategic giving journey or the next step in enhancing your philanthropy, Vanguard Charitable has the expertise and superior service to help you navigate your charitable giving. And with Vanguard Charitable's low fees and high-quality investments, the advantages go beyond tax benefits. 

Don't leave opportunities on the table. Optimize your tax strategy with a Vanguard Charitable DAF today.