Towards the end of the year, we all begin to think about giving. Do you know how to implement a year-round strategic giving strategy? Specifically, one that will reward you with tax benefits while allowing you to help make the change you want to see in the world. While giving comes in all shapes and sizes, there are three strategic ways to help positively impact your community and receive a tax benefit for your contribution.
There are year-end giving strategies you may already be familiar with that are touted to maximize your charitable contribution. For instance, there are numerous blog posts on gifting highly appreciated stock and qualified charitable distributions. The three giving ideas I will outline below go beyond the run-of-the-mill strategies.
Kicking it off with EITC
Sometimes, the most significant impact you can make is a local impact. For our Pennsylvania readers, consider taking advantage of the educational improvement tax credit (EITC). Thanks to a law passed in 2001, as a business owner or as an individual, you may use the EITC program to gift to a local educational organization while receiving a PA state tax credit in return. The longer you commit to giving, the higher your tax credit.
There are two distinctive paths to participate in this program, either as a business owner or as an individual. As a business owner, you must apply on July 1st. The program is so popular that if you delay, you likely will miss out on your share of the available credits — the program has grown significantly since it launched in 2001 and demand routinely exhausts the annual allocation.
If your business is approved, then you may make your contribution to the organization of your choice. Be careful to make your selection from the list of qualified scholarship organizations. The donation will not result in a dollar for dollar tax credit. Instead, it depends on how long your business elects to participate. If you pledge to participate for only one year, your donation will result in a tax credit of 75% of your donation. If you pledge to participate for two years, then your donation will result in a tax credit of 90% of your donation.
It works for individuals too!
As an individual, you may participate in the program via a ‘Special Purpose Entity’ (SPE), which is simply a group of people who would like to contribute capital to scholarship programs. This approach is a little more flexible than the business pathway; As an individual joining through an SPE, application windows vary by SPE — many open May 15th for renewing participants. Spots fill quickly on a first-come, first-served basis, so reach out to a participating SPE well in advance of the summer deadlines. The tax benefit is the same at the individual level. If you pledge to participate for only one year, your donation will result in a tax credit of 75% of your donation. If you pledge to participate for two years, then your donation will result in a tax credit of 90% of your donation.
The advantage here is that you are directing your PA state tax dollars to where you believe they should be spent. Not too often can you do that as a citizen. You have control of your charitable gift, and you get rewarded for giving with what can be a sizeable reduction in your state tax bill — not a bad deal.
Another option
Now that you have one more arrow in your quiver, what other strategic giving strategies are available? Charitable remainder trusts can be one option that provides the best of both worlds (in certain situations). The result is two-fold, the creation of an income stream for you and a charitable donation.
There are two main charitable remainder trust structures, a charitable remainder unit trust (CRUT) and a charitable remainder annuity trust (CRAT). As the name indicates, a CRAT allows for a fixed annuity amount each year, and additional contributions are not permitted. Whereas a CRUT provides for a fixed percentage based on the value of the trust assets, and you may add assets to the trust over time.
There are a few advantages to using a charitable remainder trust. The tax benefits tend to be a driving factor in choosing to incorporate either a CRAT or CRUT in a comprehensive estate plan. Due to the higher standard deduction — now permanent under the 2025 One Big Beautiful Bill Act (OBBBA) — most taxpayers still do not itemize. However, 2026 brings an important twist for those who do itemize: a new 0.5% AGI floor means the first 0.5% of your income in charitable gifts no longer generates a deduction. A large asset transfer into a CRT clears that floor in one move while also removing the assets from your taxable estate.
However, by deciding to use a charitable remainder trust, you may make use of the charitable deduction with a significant transfer of assets to the trust. Another benefit is that the assets will be exempt from your estate tax calculation, as they are in the trust ownership.
Lastly, the investment income from the trust is tax-exempt. Therefore, this strategy could be a valuable piece of your overall tax plan. The suitability must be evaluated in each situation. The question of including a charitable remainder trust in a comprehensive plan must consider the type of trust, the assets themselves, the income need from the trust, the desired charitable impact, and the tax impact.
By selecting to include a trust in your financial plan, you have the choice of which trust vehicle meets your needs. Thus, giving you control over the income stream that suits you. At the end of the trust’s lifespan or the death of the beneficiary, the desired impact will live on through the charity you selected initially.
Choose wisely
The caveat is that these trusts are irrevocable; once you make your choice, you are locked in. There are a few pieces that can be updated, but the strategy cannot be unwound. Therefore, this approach must be very carefully evaluated by including the appropriate professional parties. The preparation of this strategy will consist of the creation of a trust; the cost of using this approach must be factored into consideration as well.
Immediate benefits
One final strategic giving strategy to consider is a donor-advised fund. The pros here are simplicity, an immediate tax deduction, and control over which charity will receive the funds. One note for those who take the standard deduction rather than itemizing: the OBBBA created a new above-the-line deduction of up to $1,000 per year for single filers ($2,000 for married couples) for cash gifts to qualified charities, starting in 2026. However, this new non-itemizer deduction does not apply to donor-advised funds. If you are using a DAF and do not itemize, you would still need to contribute enough to exceed the standard deduction threshold to receive a federal tax benefit from your DAF contribution itself. Donor-advised funds essentially function as an investment account. Depending on which company holds the donor-advised fund, you may have some limitations on the investment options.
The first step is to identify the scope of your donation. The gift may include cash, highly appreciated stock, real estate, among other categories. The most tax advantageous for the giver is, of course, to gift highly appreciated investments from taxable accounts.
Then you make the transfer to the donor-advised fund, select the investments, and the assets continue to grow. As soon as you make the transfer, you lock in a tax deduction for that tax year — subject to your AGI limits. Starting in 2026, itemizers face a new 0.5% AGI floor (e.g., a $300,000 AGI household must give more than $1,500 before any deduction kicks in). A DAF is now one of the best tools for clearing that floor — you can bundle several years of planned giving into one large DAF contribution today, claim the full deduction now, and distribute grants to your chosen charities over time. The magnitude of the deduction still depends on the type of asset gifted.
High earners in the top 37% federal tax bracket should be aware that under the OBBBA, the tax benefit of itemized charitable deductions is capped at 35 cents per dollar donated — slightly below the prior 37% rate. This does not eliminate the deduction; it simply reduces the maximum tax benefit marginally. Qualified Charitable Distributions (QCDs) from IRAs remain unaffected by these caps and continue to be one of the most tax-efficient giving tools for those over age 70½.
Gift that keeps on giving
While the assets are in the donor-advised fund, you may select charities to direct the funds. Similar to the CRAT/CRUT strategy, you must be sure to choose eligible charities that are IRS qualified, such as 501(c)(3) charities.
What is best for you?
There are multiple strategic giving options to maximize your charitable impact while gaining control over your tax obligations. The correct approach depends on your intent, the complexity of your financial position, and the size of your intended gift. The moral of the story is that across the spectrum from the most straight forward, the donor-advised fund, to the more complex the CRUT/CRAT, you have options.
Whether you are doing year-end planning or thinking ahead for 2026, please share this post with someone who could benefit from a more strategic approach to charitable giving.
