When Clients Ask About Their Tax Bill, the Answer Might Be Philanthropy

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As tax season came to a close, many advisors faced questions like: “Why was my tax bill so high?” and “What can we do to lower my tax burden next year?” Savvy advisors know these questions open a window of opportunity and a signal to pivot to strategy. For many clients, that strategy starts with charitable giving.

As advisors consider 2026 charitable tax planning, they should consider charitable deduction changes for 2026 from the 2025 Reconciliation Act, such as:

A 0.5% floor on charitable deductions for itemizers;
A charitable deduction benefit for itemizers is limited to 35% for those in the 37% tax bracket; and
A below-the-line deduction for non-itemizers of up to $1,000 (single) and $2,000 (married filing jointly) for cash contributions to public charities (besides donor-advised funds and Section 509(a)(3) supporting organizations).

For affluent clients, philanthropy can be powerful. It can reduce tax exposure, help manage concentrated stock positions, satisfy required minimum distributions, and create a more intentional legacy strategy — all while enabling clients to align their wealth with their values.

Relationship Building

Having a conversation about philanthropy as a tax-planning strategy allows advisors to go deeper with clients, learning more about what matters to them. Take the opportunity to lean into the “yes, and” mindset to discover and identify your clients’ core values.

When advisors ask clients where they want their wealth to make an impact, clients begin talking about the causes they care about, the experiences that shaped them, and the legacy they want to leave behind. Those discussions often reveal far more than a traditional portfolio review ever could. They create opportunities for advisors to strengthen relationships in ways that go far beyond investment management.

Philanthropy conversations can open the door to multigenerational planning, as clients can bring in their children to contribute to discussions of shared values and charitable goals. For advisors, that creates an opportunity to become not just a financial resource, but a trusted partner who helps clients connect wealth with purpose.

What Advisors Should Know (and Tell Their Clients)

With the standard deduction at $16,100 for single filers and $32,200 for married couples filing jointly in 2026, many clients assume itemizing — and therefore charitable deductions — aren’t worth it.

However, the increased state and local tax (SALT) deduction cap of up to $40,400 in 2026 (subject to phase-out beginning at modified adjusted gross income of $505,000) will allow more taxpayers to itemize. For high earners and those with appreciated assets, assuming that charitable deductions aren’t worth it can leave serious money on the table.

Clients with significant income events, concentrated stock holdings, large IRAs, or longstanding charitable intentions may benefit substantially from a more strategic approach to giving.

The key is helping clients understand that charitable planning isn’t one-size-fits-all. Different tools work for different tax situations, income levels, and legacy goals.

Advisors’ Philanthropy Toolkit

Cash Donations

Cash contributions to public charities remain deductible up to 60% of adjusted gross income (AGI). Contributions to private foundations are generally limited to 30% of AGI. Importantly, unused deductions can be carried forward for up to five years. This becomes especially valuable when clients make unusually large charitable gifts during major liquidity events where the size of the contribution exceeds annual AGI deduction limits, even in a high-income year.

Appreciated Securities

Donating appreciated securities directly to charity can be more tax-efficient than donating cash.

When clients donate long-term appreciated stock directly to a qualified charity, they can deduct the full fair market value while minimizing capital gains tax. The deduction limit is generally 30% of AGI for public charities, with a five-year carryforward available. Contributions of long-term appreciated stock to private foundations are generally limited to 20% of AGI.

Donor-Advised Funds (DAFs)

DAFs continue to gain popularity because they offer flexibility and simplicity. A DAF allows clients to make a large irrevocable charitable contribution in a high-income year, receive the immediate tax deduction, and then distribute grants to charities over time.

These accounts also facilitate bunching strategies to manage the new 0.5% floor on charitable deductions for itemizers.

Qualified Charitable Distributions (QCDs)

For clients aged 70½ and older, QCDs can be one of the most tax-efficient charitable planning tools available. QCDs can satisfy required minimum distributions (RMDs) from IRAs without increasing adjusted gross income, which may help clients avoid higher Medicare premiums and additional Social Security taxation.

Advisors should emphasize one critical detail: The funds must go directly from the IRA custodian to the charity. If the client withdraws the funds first and donates afterward, the tax benefit is lost, as the IRA distribution would be considered taxable and the charitable contribution would need to follow the normal rules for deductibility.

Charitable Remainder Trusts (CRTs)

For clients with highly appreciated, low-yielding assets, CRTs can provide a powerful combination of income, tax efficiency, and legacy planning.

With a CRT, the client transfers assets into the trust, receives a partial charitable deduction, and establishes an income stream for life or a specified term. At the end of the trust term, the remaining assets pass to charity.

While more complex than other charitable strategies, CRTs can help clients diversify appreciated assets, reduce immediate tax exposure, and create long-term philanthropic impact.

Turning a Tax Complaint Into a Planning Conversation

When a client expresses frustration over their tax bill, advisors should move through a structured planning framework rather than simply reacting to the complaint.

Assess Itemization Viability

Determine whether the client’s combined deductions are likely to exceed the standard deduction threshold. If they are, charitable giving can create immediate tax value. If they will not itemize, consider more modest cash donations that qualify for the non-itemizers’ charitable deduction.

Identify Appreciated Assets

Review the client’s portfolio for long-term appreciated securities or concentrated positions. These assets are often better candidates for charitable gifts than cash because they can help clients avoid capital gains taxes while maximizing deductions.

Flag Income Spikes

Business sales, large bonuses, Roth conversions, and liquidity events often create ideal opportunities for contribution bunching strategies through a DAF or larger charitable contribution.

Review RMD Obligations

For clients with traditional IRAs who are subject to required minimum distributions, QCDs are one of the most efficient ways to satisfy charitable goals while minimizing taxable income. This is particularly valuable for retirees who do not need their RMD income for lifestyle purposes.

Discuss Legacy and Income Goals

If a client is charitably inclined but also focused on income needs or family legacy planning, more advanced tools such as CRTs or charitable lead trusts can help accomplish multiple objectives simultaneously.

Philanthropy Discussions Benefit Everyone

These conversations often uncover broader estate planning opportunities and help clients think more intentionally about the long-term purpose of their wealth.

Charitable planning helps clients align their financial decisions with the people, causes, and communities they care about most, while minimizing their tax burden. And for advisors willing to lead those conversations thoughtfully, it can become one of the most meaningful relationship-building opportunities in the entire planning process.

Deb Dubin is chief philanthropy officer at Moneta. Brighton Samet is a planning consultant at Moneta.

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