Charitable Giving Strategies for Business Owners: Donor-Advised Funds, CRTs, Qualified Charitable Distributions, and Bunching

By Yarik Yarosh, CPA ·September 5, 2026 ·7 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Charitable giving is one of the few areas of the tax code where the taxpayer can simultaneously reduce their tax bill, support causes they care about, and in some cases (with charitable remainder trusts), create a lifetime income stream. Under IRC 170, the charitable deduction is limited by the type of contribution, the type of recipient organization, and the donor’s adjusted gross income. The most common mistake is giving cash and claiming the deduction, when contributing appreciated property (stock, real estate, or business interests held more than one year) eliminates the capital gains tax on the appreciation while still providing a deduction for the full fair market value. For a business owner who holds $500,000 of appreciated stock with a $100,000 basis, donating the stock produces a $500,000 deduction and avoids $95,200 in capital gains tax (23.8% of $400,000 appreciation), for a total tax benefit of $280,200 ($500,000 x 37% + $95,200 capital gains avoided). Selling the stock and donating the cash produces only $185,000 in tax savings ($500,000 deduction x 37%) and still triggers the $95,200 capital gains tax.

✓Key takeaway

Charitable contribution AGI limits (2025):

Contribution Type	Public Charity (50% organizations)	Private Foundation
Cash	60% of AGI	30% of AGI
Appreciated long-term capital gain property (FMV)	30% of AGI	20% of AGI
Appreciated property (elect cost basis deduction)	50% of AGI	N/A
Carryforward	5 years	5 years

Charitable giving strategies comparison:

Strategy	Best For	Tax Benefit	Complexity
Direct cash gift	Simple giving; income below standard deduction threshold (when bunching)	Deduction for amount given	Low
Appreciated stock/property gift	Avoiding capital gains on appreciated assets	Deduction for FMV + avoids capital gains tax	Low
Donor-Advised Fund (DAF)	Bunching; large one-time deduction; ongoing grants over time	Large upfront deduction; tax-free growth in DAF	Low
Charitable Remainder Trust (CRT)	Converting appreciated assets into income stream; estate planning	Avoids capital gains; income stream; partial deduction	High
Qualified Charitable Distribution (QCD)	IRA owners over 70.5; satisfies RMD tax-free	Excludes distribution from income (not a deduction)	Low
Private foundation	Control over grants; family involvement; legacy	Deduction within limits; perpetual entity	Very high
Conservation easement	Landowners; preserving property while retaining ownership	Large deduction (50-100% of AGI); 15-year carryforward	High

How do charitable giving strategies save taxes?

Hypothetical example

Round numbers. A business owner has $1,000,000 in AGI, holds $300,000 of appreciated stock (basis $50,000), and wants to give $100,000 to charity this year.

Strategy 1: Give cash

Item	Amount
Cash contribution	$100,000
Charitable deduction	$100,000
Tax savings (37%)	$37,000
Capital gains tax on appreciated stock (not donated)	Still owed when stock is sold

Strategy 2: Give appreciated stock

Item	Amount
Stock donated (FMV)	$100,000
Stock basis	$16,667 (proportional)
Charitable deduction	$100,000
Tax savings (37%)	$37,000
Capital gains avoided (23.8% on $83,333 appreciation)	$19,833
Total tax benefit	$56,833

Savings vs. cash: $19,833 (the avoided capital gains tax)

Strategy 3: Donor-Advised Fund (DAF) bunching Instead of giving $50,000 per year for 4 years, the owner contributes $200,000 of appreciated stock to a DAF in Year 1 and grants $50,000 per year to charities from the DAF.

Year	Without Bunching	With DAF Bunching
Year 1	$50,000 deduction	$200,000 deduction (+ capital gains avoided on $150,000 appreciation)
Year 2	$50,000 deduction	$0 (take standard deduction instead)
Year 3	$50,000 deduction	$0 (standard deduction)
Year 4	$50,000 deduction	$0 (standard deduction)
4-year total deductions	$200,000	$200,000 + 3 years of standard deduction ($90,000)
Additional deductions from bunching		$90,000
Tax savings on additional deductions		$33,300
Capital gains avoided (23.8% on $150,000)	$0	$35,700
Total additional tax savings from bunching + appreciated stock		$69,000

Strategy 4: Charitable Remainder Trust (CRT) The owner contributes $1,000,000 of appreciated real property (basis $200,000) to a charitable remainder unitrust (CRUT). The CRT sells the property and reinvests the proceeds.

Item	Amount
Property donated to CRT (FMV)	$1,000,000
Capital gains if sold personally (23.8% on $800,000)	$190,400
Capital gains if sold inside CRT	$0 (CRT is tax-exempt)
Upfront charitable deduction (approximately 30-40% of FMV, depending on payout rate and term)	~$350,000
Tax savings from deduction (37%)	$129,500
Annual income from CRT (5% payout rate)	$50,000/year
Tax on CRT distributions	Ordinary income/capital gain (4-tier system)
Remainder to charity (at end of CRT term or donor’s death)	~$600,000-$1,000,000

Benefit	Amount
Capital gains tax avoided	$190,400
Upfront deduction tax savings	$129,500
Annual income stream (lifetime)	$50,000/year
Total first-year tax benefit	$319,900

Strategy 5: Qualified Charitable Distribution (QCD) For IRA owners age 70.5+:

Item	Amount
Required Minimum Distribution (RMD) at age 73	$50,000
If withdrawn as income: tax (37%)	$18,500
If donated as QCD: tax	$0
Tax savings	$18,500

QCD rules:

Rule	Details
Maximum QCD	$105,000/year (2025, indexed for inflation)
Age requirement	70.5+
Eligible accounts	Traditional IRA, inherited IRA (NOT 401(k), 403(b), SEP, or SIMPLE while contributing)
Satisfies RMD	Yes
Reported as income?	No (excluded from gross income)
Charitable deduction?	No (cannot double-count)
Better than deduction?	Yes (reduces AGI, which affects Medicare premiums, Social Security taxation, and other AGI-based thresholds)

C-Corp charitable deductions:

Rule	Details
Limitation	10% of taxable income (computed without the deduction, NOL carryback, and certain other items)
Carryforward	5 years
Enhanced deduction for food inventory	Up to 15% of taxable income for contributions of food to food banks
Appreciated property	Deduction for FMV (if held > 1 year and contributed to public charity)

S-Corp and partnership charitable deductions:

Rule	Details
Deduction passes through to shareholders/partners	Each owner reports their share and applies their own AGI limits
Basis reduction	Shareholder/partner basis is reduced by the full FMV of the charitable contribution (not the owner’s share of the property’s basis)
Risk	Charitable contributions can reduce basis below zero, creating a taxable event for S-Corp shareholders

Illustrative numbers only, not a real client and not advice for your facts.

What are the deduction limits for charitable contributions by businesses?

C-Corporations can deduct charitable contributions up to 10% of taxable income (computed before the deduction, NOL carrybacks, and certain other items), with excess contributions carried forward for 5 years. Sole proprietors, partners, and S-Corp shareholders deduct charitable contributions on their personal returns, subject to limits based on the type of property donated and the type of recipient: cash to public charities is limited to 60% of AGI, appreciated capital gain property to public charities is limited to 30% of AGI, and contributions to private foundations face lower limits. Donating appreciated property held more than one year (such as stock) lets you deduct the full fair market value while avoiding the capital gains tax you would owe if you sold it first. A donor-advised fund lets you bunch multiple years of charitable giving into a single tax year to exceed the standard deduction threshold, then recommend grants from the fund over time.

Related guides:

Charitable Giving Tax Strategies: Donor-Advised Funds, Appreciated Property, and CRTs

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Cite this page

Yarik Yarosh, CPA. "Charitable Giving Strategies for Business Owners: Donor-Advised Funds, CRTs, Qualified Charitable Distributions, and Bunching." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-charitable-giving-strategies-business-owners

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.