The Most Generous People I Know Are Quietly Overpaying the IRS

Some of the most generous people I know are quietly overpaying the IRS.

I've worked with religious and secular clients alike. The instinct to give 10 percent of income runs deep in the Jewish community, and honestly, it's something to be proud of. Tzedakah isn't a line item people negotiate down. It's a given.

But generosity and tax strategy are two different muscles. One comes from the heart. The other comes from knowing the rules. You can be excellent at the first and still leave real money on the table with the second.

The most natural way to give is also the most expensive

Most people write a check. It feels clean and simple, and it is. It's also usually the costliest way to give.

Here is the math almost nobody runs.

Give $10,000 in cash, and you deduct $10,000.

Give $10,000 in stock you bought years ago for $4,000, and you deduct the full $10,000 AND you skip the tax on the $6,000 gain you would otherwise owe.

Same gift. The charity receives the same amount and can't tell the difference. Your tax bill can.

Two moves most people never hear about

The first is to donate appreciated stock instead of cash. If you've held the shares longer than a year, you deduct the full market value and the embedded gain simply disappears. You were going to give anyway. This just means the IRS isn't taking a cut of your generosity on the way out.

The second is to bunch several years of giving into one. The standard deduction is high enough that many people's charitable gifts vanish underneath it and produce no tax benefit at all. By grouping two or three years of giving into a single year, often through a donor-advised fund, you clear the standard deduction and capture the benefit you actually earned. The fund then distributes to your causes on whatever schedule you choose, so nothing changes for the organizations you support.

The two moves also stack. You can give appreciated stock into a donor-advised fund in a bunching year and get both advantages at once.

The point

None of this asks you to give a dollar less. It asks you to give the same amount more intelligently.

If you're already giving, and most of the people reading this are, the only real question is whether you're capturing the full deduction you're entitled to or quietly handing part of it back.

That part is worth getting right.