Don’t forget this great year end tax strategy that rich people use to pay less taxes

The “rich people” year-end move in one sentence

Before December 31, contribute appreciated long-term investments (like stock) to a donor-advised fund, then
“bunch” multiple years of giving into one big deduction year.

It’s not a magic trick. It’s more like a well-timed costume change: the deduction happens this year, the gifting can
happen on your schedule, and the IRS doesn’t ask you to perform charity in real time.

Why this strategy works so well

1) You can deduct now, even if you give later

With a DAF, your contribution is treated like a gift to a qualifying public charity. That means you generally get the
tax deduction for the year you make the contributioneven if the charities you support receive grants months (or years)
later. This is the “year-end” superpower: you can lock in the deduction before the calendar flips.

2) Donating appreciated assets can dodge capital gains tax

If you donate appreciated long-term investments directly (or into a DAF), you can generally deduct the fair market value
and avoid paying capital gains tax on the growth. In plain English: instead of selling stock, paying tax on the gain,
and donating what’s left, you donate the shares and potentially keep more value working for your causes.

3) “Bunching” helps you actually benefit from the charitable deduction

Here’s the blunt truth: many taxpayers take the standard deduction, which means their charitable gifts don’t change
their federal taxable income. Wealthier households often solve this by bunchingthey stack multiple years of
charitable giving into one tax year so their itemized deductions clear the standard deduction hurdle. Next year? They
can go back to the standard deduction while still supporting charities via grants from the DAF.

4) There are clear IRS rulesand flexible guardrails

The IRS limits how much you can deduct in a single year based on your adjusted gross income (AGI), and the limits can
differ for cash vs. appreciated property. If you give “too much” to deduct this year, you can generally carry forward
unused charitable deductions for several future years. That’s not a penalty; it’s basically a rain check from the tax code.

How to do it before December 31 (without making your accountant sigh)

Step 1: Pick your “giving budget,” then decide how many years to bunch

Start with a realistic number you’d like to give in total. Then ask: are you trying to itemize this year?
Bunching works best when a single year of giving pushes your itemized deductions comfortably above the standard deduction.
Many people bunch 2–3 years at a time, but there’s no single “correct” number.

Step 2: Choose the right asset to donate (hint: not the one you just bought last week)

The classic move is donating long-term appreciated assets (generally held more than one year),
because that’s where you may get the double benefit: a deduction based on fair market value and avoidance of capital gains.
Common candidates:

• Individual stocks that have grown substantially
• ETF shares with meaningful appreciation
• Mutual fund shares (often possible, but can take more processing time)

Many wealthy taxpayers deliberately donate their “big winners” and keep the cash they would’ve donatedbecause cash is
boring, and appreciated stock is basically a tax planning plot twist.

Step 3: Open and fund a donor-advised fund (DAF) early enough

DAFs are offered by major financial institutions and many community foundations. Setting one up can be straightforward,
but funding with non-cash assets can take time, especially near year-end when everyone else has the same idea.
If you want the deduction for this tax year, the contribution generally needs to be completed by December 31.

Step 4: Keep the paperwork clean (the IRS loves receipts the way cats love knocking things off tables)

You’ll want proper substantiation for charitable gifts. Requirements vary depending on what you donate and how much.
For non-cash contributions above certain thresholds, you may need to file specific forms with your return.
If you’re donating property (not publicly traded securities), you may also need qualified appraisals for larger gifts.
The point: plan for documentation the same way you plan for taxesbefore you’re staring at a deadline.

Step 5: Grant to charities laterstrategically and calmly

Once the DAF is funded, you can recommend grants over time to eligible charities. You can spread gifts across multiple
organizations, set up recurring grants, or wait until you’ve done more research. Your tax deduction is tied to funding
the DAF, not to each grant.

A concrete example (with easy math and zero monocles)

Let’s say Jordan has a strong income yearbig bonus, strong business revenue, or a monster year in the market.
Jordan also gives about $10,000 to charity annually and usually takes the standard deduction.

This year, Jordan decides to “bunch” three years of giving: $30,000 total. Instead of donating $30,000 cash,
Jordan contributes $30,000 worth of long-term appreciated stock into a DAF.

• Tax deduction potential: Jordan may itemize this year and claim a charitable deduction (subject to IRS limits).
• Capital gains avoided: Jordan doesn’t sell the stock, so there’s no capital gains tax triggered on the appreciation.
• Giving stays consistent: Over the next three years, Jordan recommends grants of about $10,000/year to favorite charities from the DAF.

Result: Jordan supports the same causes with a similar total amount, but may lower taxes in the “high-income” year
when deductions are often most valuable.

Common mistakes that ruin the vibe (and sometimes the deduction)

Waiting until the last week of December for non-cash gifts

Transfers of stock can be quickuntil they aren’t. Broker processing, year-end volume, and paperwork can turn a “simple”
donation into an unexpected mini-series. If you want a year-end deduction, start earlier than your anxiety thinks you need to.

Donating the wrong thing

Donating investments that are down may not be optimal. Often, it’s better to sell a losing investment, potentially capture
the capital loss (if it fits your situation), and donate cashwhile donating appreciated winners as shares.
Asset selection is half the strategy.

Forgetting AGI limits and carryforwards

Charitable deductions are generally limited by a percentage of AGI and can differ by asset type and recipient category.
If you contribute an amount that exceeds what you can deduct this year, you may be able to carry the remainder forward
but you need to track it properly.

Mixing up DAF giving with IRA “QCD” giving

Retirees sometimes use Qualified Charitable Distributions (QCDs) from IRAs to reduce taxable income. That’s a great tool
but QCD rules generally don’t allow sending a QCD to a donor-advised fund. If you’re using retirement-account strategies,
keep the lanes separate.

Claiming a deduction when you received a benefit

If you got something valuable in return (tickets, meals, merch with real value), your deductible amount can be reduced.
In general, clean charitable gifts are easiest for tax purposes. Keep it simple: donate because you care, not because you
wanted the gala chicken.

The “stack” wealthy taxpayers often pair with this strategy

The donor-advised fund move is powerful on its own, but higher-income households often combine it with other year-end
tactics to shape taxable income more precisely:

Tax-loss harvesting (TLH) to offset capital gains

If you realized capital gains this year, harvesting capital losses can help offset them. If losses exceed gains, you may be
able to use a limited amount against ordinary income and carry the rest forward. Watch out for the wash sale rule: buying
the same or “substantially identical” investment too close to the sale can disallow the loss.

Timing income and deductions

Business owners sometimes accelerate expenses or delay income (where appropriate) around year-end. W-2 employees can’t
do as much here, but they can still manage withholdings, bonus timing (if flexible), and retirement contributions.

Retirement-based giving for eligible seniors

For those eligible, QCDs can be a clean way to give directly from an IRA, potentially lowering adjusted gross income.
This can matter for other tax calculations tied to AGI. Again: it’s a different tool than a DAF, and it has its own rules.

A quick year-end checklist

• Early December: Decide whether you’ll itemize and whether bunching makes sense.
• Mid-December: Identify appreciated assets (held long-term) you’d consider donating.
• Before the rush: Open/fund your DAF and initiate transfers with enough lead time.
• By December 31: Ensure contributions are completed for the current-year deduction.
• January and beyond: Plan grants to charities thoughtfullyyour timeline, your priorities.

If your situation includes complex assets, unusually high income, or major life changes, this is one of those times when
a qualified tax professional can pay for themselves in reduced stress alone.

Real-World Experiences: What People Learn the First Time They Try This (Extra)

People who use a donor-advised fund for the first time tend to have the same emotional arc: confidence, paperwork,
mild panic, then a strange sense of power when they realize they can separate the tax deduction from the actual schedule
of giving. In conversations with advisors and donors, a few themes come up again and again.

First, the biggest “aha” moment is usually asset choice. Many donors start by thinking, “I’ll just give cash.”
Then they run the numbers and realize their most expensive dollars are often the ones with embedded capital gains.
Donating appreciated shares can feel like finding an extra coupon in your pocketexcept the coupon is legal, and it might
be worth thousands depending on how much the investment grew.

Second, timing becomes a real character in the story. People assume “December 31” means “I can do it on December 31.”
Then they discover how quickly broker forms, transfer steps, and holiday schedules can turn the last week of the year into
a suspense thriller. The donors who enjoy the process the most are the ones who treat year-end planning like booking
holiday travel: earlier is cheaper, calmer, and less likely to involve tears.

Third, many donors discover that bunching changes their giving behavior in a good way. Instead of making scattered,
last-minute donations, they start planning in “giving seasons.” One year becomes the big funding year (deduction year),
and the next couple of years become the thoughtful distribution years. People report feeling more intentionalsupporting
fewer causes more deeply, or creating a simple plan like “one local nonprofit, one national health charity, one education
program,” repeated annually.

Fourth, the DAF structure can reduce decision fatigue. Donors often like the idea of giving, but they don’t always want
to pick recipients during the busiest weeks of the year. Funding the DAF lets them “do the tax part now” while giving
themselves time to research impact, verify eligibility, and even involve family members in deciding where grants go.
Some families turn it into a yearly tradition: reviewing causes together and making grants in January when everyone’s
brain is working again.

Finally, many people learn that documentation is not optionalit’s the price of admission. The smoothest experiences
happen when donors keep confirmations, acknowledgments, and any needed forms organized from day one. The messy experiences
usually come from trying to reconstruct details months later (often while also trying to remember passwords they
definitely wrote down somewhere).

The overall takeaway donors share is simple: this strategy isn’t about “getting away” with anything. It’s about aligning
generosity with smart tax timingso you can keep more resources available for the causes you care about, and less lost
to avoidable friction.

Final thought

The year-end “rich people” strategy isn’t a secret handshake. It’s a repeatable system:
fund a donor-advised fund with appreciated assets, bunch deductions when it helps, and give thoughtfully over time.
Done right, it can reduce taxes, simplify giving, and make your December feel less like a sprint and more like… a plan.

Friendly reminder: tax rules are detailed, personal, and sometimes allergic to shortcuts. If you’re making large gifts,
dealing with complex investments, or coordinating with retirement distributions, get professional guidance so the strategy
works the way you intend.