Americans give hundreds of billions of dollars to charity each year, making philanthropy a defining feature of our national culture. That generosity benefits more than the organizations and communities receiving support: Research suggests that giving can also improve the donor’s happiness, sense of purpose, and connection to others. Our government actively encourages this behavior through charitable tax deductions and other incentives, reflecting a longstanding public-policy judgment that private generosity serves the broader good.
The “how” of charitable giving can be as simple as writing a check or leaving cash in a donation box. However, this isn’t necessarily optimal for everyone. In this article, I walk through several intentional strategies that can maximize both the personal impact and the tax efficiency of charitable giving.
Practices that enhance the psychological benefit of giving
1. Contribute where you can see the impact
Charitable giving can allow donors to express their identity and values. People appear to obtain more satisfaction when they can understand how their contribution helped. In one series of studies, charitable giving increased happiness particularly when donors were given clear information about the gift’s positive effect. That suggests a practical lesson: A donation to a specific program (such as funding five vaccinations, a scholarship, or a week of food assistance) may feel more rewarding than an unrestricted contribution whose outcome remains invisible.
2. Take advantage of matching
Some hospital systems match employee donations, often dollar for dollar, to qualifying organizations. If charitable giving is an important goal, then you can look at the match similarly to how you would view a match to your retirement plan. It allows your own donations to go farther, and it augments their impact.
3. Use giving to strengthen social connections
The emotional rewards of spending on others are greater when the gift creates meaningful personal interaction. Experiments have found that prosocial spending produces greater happiness when it facilitates connection between the giver and recipient.
Real physician voices, twice a week
Free, and one click to unsubscribe.
For physicians, that might mean:
- Supporting a local free clinic where they also volunteer
- Joining a giving circle with colleagues
- Involving children in selecting family donations
Practices that enhance the financial benefit of giving
It is important to first emphasize that donating to charity is not a way to become wealthier. However, you can use this to lower your tax liability, which can partially offset the cost of the donation. Here are some of the techniques you can use to make the most of the tax benefit.
4. Optimize the timing of your donations
Best for: physicians who itemize their deductions
As a result of recent changes in tax law, more taxpayers are itemizing their deductions. Beginning in 2026, itemizers generally lose the deduction for the first 0.5 percent of adjusted gross income (AGI) donated during the year. For example, a physician with $400,000 of AGI would generally receive no deduction for the first $2,000 donated.
There is another common situation that limits the tax benefit of charitable donations. It’s possible that your charitable donations push your itemized deductions slightly above the standard deduction. As a result, while you can lower your taxable income a bit, only part of your donations actually provide incremental benefit beyond the standard deduction.
A “bunching” strategy can be useful in this scenario for deducting more of your donations. Broadly, this means concentrating more of your donations (possibly several years’ worth) in one year, thus ensuring that a larger portion will be claimed as itemized deductions. This can help you minimize the effect of the two limitations mentioned above.
5. Donor-advised funds
Best for: physicians who want to donate investments that have risen in value
If you have investments in a taxable account, you may be aware that capital gains taxes are calculated based on how much they have risen in value since you purchased them. If you buy individual stocks, or hold investments for a long period of time, the tax bill can result in reluctance to sell.
If you have held publicly traded investments for longer than a year, you can generally deduct their fair market value when you donate them to a qualified charity, subject to applicable limits. If you are charitably inclined and want to simplify your investments, this can be a win-win.
Appreciated investments can be donated directly to a charity or contributed to a donor-advised fund (DAF). With a DAF, contributions are deductible in the year of transfer, but distributions can occur in later years. This works well in combination with the “bunching” strategy, discussed earlier, because it allows you to optimize the timing of the tax deduction while also retaining the regularity and consistency of your support.
6. Small cash donations
Best for: physicians who take the standard deduction
One positive change in 2026 is that you can deduct some charitable donations even if you don’t itemize your deductions. However, the deductions must be in cash form (they can’t be household items or appreciated assets). The threshold of 0.5 percent of income, discussed earlier, also doesn’t apply. The maximum you can deduct in addition to the standard deduction in 2026 is $1,000 if you’re single, or $2,000 if married and filing jointly.
7. Qualified charitable distributions
Best for: physicians age 70 1/2 or older
Qualified charitable distributions (QCDs) are an effective tool for lowering taxes in retirement. Importantly, you must be over 70 1/2 to take advantage of this, and it only applies to withdrawals from IRAs (not 401(k)s). Best of all, this amount isn’t taken as an itemized deduction; it is excluded from your taxable income completely. This is especially valuable because it results in a lower AGI, which may preserve other income-sensitive deductions (such as the new senior deduction). This may also reduce income-related premiums for Medicare Parts B and D.
If you are within a few years of becoming eligible for QCDs, it may be a good time to start planning for them, especially if your ability to deduct donations is currently limited.
Logan Foltz is a physician and tax specialist.
