How a Missouri Couple Gave $40K to Charity—Without Giving More to Uncle Sam
Written by John Davis, CFP®, EA
Charitable giving is often driven by generosity—but with the right planning, it can also be remarkably tax-efficient. A recent case involving a couple here in Missouri shows how thoughtful strategy can help maximize the impact of giving while minimizing the tax bill.
The Backstory
This couple, both over 65, have a long-standing habit of donating about $10,000 per year to charitable causes. The husband, age 69, is still working part-time and earns $70,000 annually. Their other income sources are modest—just dividends and interest—bringing their Adjusted Gross Income (AGI) to around $85,000.
Because of their age, they qualify for an enhanced standard deduction of $34,700. That means unless their itemized deductions exceed that amount, they won’t receive any additional tax benefit from their charitable giving. With only about $7,500 in State and Local Taxes (SALT) and no mortgage interest, their itemized deductions weren’t even close to surpassing the standard deduction.
The Strategy: Charitable Bunching with a Donor Advised Fund
To make their giving more tax-efficient, we decided to bunch four years’ worth of charitable contributions into a single year using a Donor Advised Fund (DAF). We contributed $40,000 of highly appreciated securities from their taxable investment account to the DAF. This allowed them to front-load their giving while continuing to support their favorite causes over time.
This strategy—known as charitable bunching—can be especially effective for donors who give consistently but don’t have enough deductions to itemize each year.
The Obstacle: The 30% AGI Rule
Here’s where it got tricky. The IRS limits the deductibility of gifts of appreciated securities to 30% of AGI. With an AGI of $85,000, only $25,500 of the $40,000 gift would be deductible. Combined with their SALT taxes, their total itemized deductions would have been just $33,000—still below the $34,700 standard deduction.
So we needed a way to increase their AGI—without increasing their tax liability.
The Solution: Realizing Gains Strategically
We chose to realize $50,000 of long-term capital gains from their taxable account. Because they’re in the 12% marginal federal tax bracket, those gains were not subject to federal tax. And since they live in Missouri, which does not tax long-term capital gains, there was no state tax either.
This move increased their AGI to $140,000, which allowed:
The full $40,000 DAF gift to be deductible under the 30% AGI rule.
Total itemized deductions of $45,000, well above the standard deduction.
Roughly $1,500 of tax savings when considering federal and Missouri state taxes.
A reset of cost basis on $50,000 of appreciated securities—at no tax cost.
A Note on the OBBBA Deduction
We were also mindful of the One Big Beautiful Bill Act (OBBBA), which provides an additional $12,000 deduction for taxpayers over 65 with MAGI under $150,000. While this couple would have qualified either way, we made sure not to exceed that threshold when realizing gains.
Why It Worked
This couple was going to give either way. The strategy didn’t change their generosity—it simply ensured that more went to charity and less to Uncle Sam. By leveraging a Donor Advised Fund, understanding the 30% AGI rule, and taking advantage of their tax bracket, we turned a routine act of giving into a tax-smart financial move.
Final Thought
This case is a great example of how charitable giving, when paired with thoughtful planning, can achieve more than just supporting good causes. It can also improve tax efficiency, preserve wealth, and align financial decisions with personal values. Whether you're giving $10,000 or $100,000, strategies like charitable bunching, DAFs, and capital gain harvesting can help you make the most of your generosity—especially in a tax-friendly state like Missouri.
