Charitable giving is one of the most meaningful ways people support their communities, their faith, and the causes closest to their hearts. Many families will support the causes they believe in regardless of the tax benefit. But if generosity is already part of the plan, it makes sense to ensure those dollars are also creating the maximum tax advantage.
Recent changes under OBBBA have made charitable giving less tax-advantaged for many families. With today’s larger standard deduction, far fewer households itemize deductions. That means many people are giving thousands to charity each year and receiving no tax benefit in return. Even higher-income households that do itemize often face new haircuts or percentage limits that reduce the value of their charitable deductions.
A solution exists for those who want to give and still receive a tax benefit: the non-grantor trust. Unlike individuals, a properly drafted non-grantor trust does not take the standard deduction. Instead, it can deduct charitable gifts directly, without being limited by AGI caps or haircut rules.
Consider a retired couple in their early 60s with an annual income of about $150,000 from pensions and investments. Every year they donate $20,000 to their church and local nonprofits. Because their other deductions are modest, they claim the standard deduction of $31,500 and receive no tax benefit from their giving.
Instead, they could shift from their investment portfolio to a non-grantor trust enough assets to generate $20,000 of annual income. If they directed that income to charity, the trust could deduct the full $20,000 each year. This turns their gifts into a source of real tax savings. At current tax rates, the deduction avoids roughly $7,000 in taxes annually. Over a decade of giving, that adds up to about $70,000 in avoided taxes—without changing the amount given or the recipients of their generosity.
Charitable giving will always be about impact first. But smart planning can make those dollars go further—for both the causes being supported and your family’s overall financial plan.