Smart Year-End Charitable Giving Strategies for 2025
The holiday season often inspires a renewed desire to give. In addition to supporting the causes that matter most to you, charitable donations can also serve as a valuable part of your 2025 year-end tax planning. Here’s how to ensure your generosity creates meaningful impact while maximizing your tax benefits.
1. Research Charitable Organizations
Before making a gift, take time to verify that your chosen nonprofit is reputable and tax-deductible.
Confirm 501(c)(3) Status
Only organizations with a recognized 501(c)(3) designation can receive tax-deductible contributions.
Use Trusted Charity Evaluation Tools
These platforms can help you understand how effectively a nonprofit uses its resources:
- BBB Wise Giving Alliance – Reviews governance, accountability, financial integrity, and transparency.
- Guidestar by Candid – Provides nonprofit profiles and transparency seals (Bronze–Platinum).
- Charity Navigator – Rates thousands of charities based on financial health and accountability.
- CharityWatch – Offers expert analysis of nonprofit spending and efficiency.
- GiveWell – Focuses on high-impact, evidence-driven organizations.
2. Decide Whether to Itemize Deductions in 2025
To benefit from charitable deductions, you must itemize instead of taking the standard deduction.
Documentation Requirements
- Keep receipts for all charitable gifts.
- For donations $250 or more, charities must provide written acknowledgment.
- Larger gifts may require additional reporting on your tax return.
Use a “Bunching” Strategy
If your annual charitable giving doesn’t exceed the 2025 standard deduction, you may benefit from “bunching” contributions into one tax year.
This strategy involves:
- Delaying December donations into January.
- Then giving two years’ worth of donations the following December.
This boosts your itemized deductions in one year, increasing the likelihood of a tax benefit.
3. Make Non-Cash Donations
Gifts don’t have to be in cash. Non-cash contributions—especially appreciated securities—can offer significant tax advantages.
Benefits of Donating Appreciated Assets
When gifting long-term appreciated stock or mutual funds:
- You avoid capital gains tax that would apply if you sold the asset.
- You may deduct the full fair market value.
- The charity receives the full value, not the after-tax amount.
This is one of the most tax-efficient charitable giving strategies available.
4. Use Life Insurance as a Charitable Tool
If you own a life insurance policy you no longer need, gifting it to a charity may provide valuable tax benefits.
Potential Advantages
- An income tax deduction for the policy’s fair market value.
- Premium payments made after the gift may qualify as additional deductions.
- The death benefit may ultimately be removed from your taxable estate.
Important Considerations
Life insurance strategies involve complex factors such as insurability, premium costs, tax implications, and policy expenses. Always review with a qualified advisor before proceeding.
5. Consider a Donor-Advised Fund (DAF)
A donor-advised fund is an excellent option if you want the tax deduction in 2025 but prefer to support charities over time.
Why DAFs Are Popular
- Immediate tax deduction in the year of contribution
- Flexibility to distribute funds in future years
- Investment potential for tax-free growth
- Ideal for high-income earners or those nearing retirement
Give Wisely and Plan Ahead
Thoughtful planning ensures that your generosity supports the causes you care about while maximizing your tax benefits. If charitable giving is part of your long-term financial plan, your HCM advisor can help you evaluate strategies, track documentation, and select the most tax-efficient approach.
Want to learn more? Watch CEO Mike Hengehold's recent video on Tax Smart Charitable Giving for 2025.