As 2025 draws to a close, high-income taxpayers have a narrowing window to maximize charitable deductions under current rules. Starting in 2026, itemized deductions are expected to become less favorable for many due to the scheduled return of deduction phaseouts.
One timely strategy for donors over age 59 1⁄2 combines two tax levers: gifting long term held appreciated securities to a donor-advised fund (DAF) and taking a taxable IRA withdrawal of similar value in the same year. When executed thoughtfully, this pairing can preserve full deduction treatment while moving pre-tax dollars into long-term charitable use. Non-itemizers may not benefit.
At Brickley Wealth Management, we help clients structure these actions carefully, because timing, sequence, and asset selection all matter.
Why 2025 Matters
Beginning in 2026, existing tax law reinstates a modest reduction in itemized deductions for high-income taxpayers. Often called the “charitable shave,” this provision limits the deductibility of large gifts. By accelerating gifts into 2025, itemizers can preserve their full deduction value.
This strategy is not relevant for taxpayers taking the standard deduction. Its benefit depends on itemizing in the same year that income is recognized.
The Core Strategy: Donate, Then Replace
The concept is straightforward:
- Donate long-term (held over one year) appreciated securities to a donor-advised fund.
- Take a taxable IRA withdrawal of similar value to replace the donation.
The gift to the Donor-Advised Fund may generate a deduction equal to the full fair market value (up to 30% of AGI for public securities held long term) and avoids capital gains on the appreciation. The IRA withdrawal is taxable but penalty-free for those over age 59½. When both occur in the same tax year, the deduction can offset much of the withdrawal income. Non-itemizers may not benefit.
This approach is especially attractive in the years before Qualified Charitable Distributions (QCDs) become available at age 70½.
Qualified Charitable Distributions (QCDs) & Donor-Advised Funds (DAFs) Serve Different Roles
Qualified Charitable Distributions allow direct IRA transfers to a qualified charity, satisfying Required Minimum Distributions (RMDs) tax-free. However, donor-advised funds (DAFs) cannot accept a Qualified Charitable Distribution.
That creates a planning window between ages 59 1⁄2 and 70 1⁄2 where the replacement-pairing technique can bridge charitable intent with IRA access without triggering penalties or losing deduction eligibility.
Timing Strategy: Gift First, Replace Later
If markets are volatile, the order of operations can make a difference.
- Donate appreciated securities first to lock in the deduction at current market values.
- If values fall later, the IRA withdrawal needed to “replace” the gift can be done at lower prices reducing tax cost.
- Doing the reverse risks the opposite: higher taxable income and a lower deduction if markets decline before the gift.
While this isn’t a market-timing strategy, it introduces a small but meaningful asymmetry in volatile environments.
Implementation Checklist
- Confirm you’ll itemize in 2025
- Use public securities held over one year for full deduction eligibility
- Stay within Adjusted Gross Income limits (30% appreciated property; 60% cash)
- Gift appreciated assets and take the IRA withdrawal in the same calendar year
- Coordinate with your portfolio team to avoid duplication
- Obtain the grant letter from your Donor-Advised Fund for documentation for charitable deductions
The Takeaway
For high-income itemizers over age 59 1⁄2, the 2025 tax year provides a unique alignment: full deduction rules, penalty-free IRA access, and the ability to move appreciated assets into long-term charitable use via a donor-advised fund.
After 2026, deduction limitations return. And after age 70 1⁄2, Qualified Charitable Distributions become the preferred tool but donor-advised funds can’t receive them. That makes the next 12–15 months a key window for donors considering this coordination strategy.
As always, effective execution requires coordination between your advisory and tax planning professionals. At Brickley Wealth Management, we help clients align charitable goals, portfolio management, and tax planning under one cohesive plan.