Donate $100K to charity. Your true cost? $63K.
HOW TO GIVE MORE AND SPEND LESS
I am not a genius investor or a stock picker, but in 2012 I got lucky and bought a great stock. This year, I gave it away and won three times. Here is exactly what I did and how it works:
I bought AMD stock in 2012 for $1,100.
Today it's worth nearly $100,000.
If I had sold it and donated the cash to charity, here's what would have happened:
- Capital gains tax: $23,562
- Cash left to donate: $76,438
- Tax deduction: $28,282 (at 37% bracket)
- Amount charity receives: $76,438
Instead, I donated the stock directly to a Donor Advised Fund.
- Capital gains tax: $0 (avoided entirely)
- Tax deduction: $37,000 (full $100,000 value at 37% bracket)
- Amount charity receives: $100,000
By donating the stock directly instead of selling first it created a win-win-win situation for me:
- Charity wins: Gets $23,562 MORE
- I win: Save $8,718 in taxes
- IRS loses: Collects $60,562 less
This is called the "Triple Dip" — and it's one of the most clever tax strategies most people never use.
The Cardinal Rule I Learned
Never have capital gains and charitable giving in the same year if you can help it.
Why? Because you're leaving money on the table. Big money.
When you sell appreciated assets and donate to charity separately, you're essentially paying the IRS to be generous. That makes no sense.
The Triple Dip Explained
Here's why this works so well:
Dip #1: You avoid capital gains tax entirely — When you donate appreciated stock, you never pay tax on the gain. That $23,562 I would've paid? Gone.
Dip #2: You deduct the full market value — You get a tax deduction for what the stock is worth today, not what you paid for it. That's a $37,000 deduction at my 37% tax bracket.
Dip #3: You can buy the stock back (optional) — Love your position? Donate the shares, then immediately buy them back. Same position, but now your cost basis is $100,000 instead of $1,100. Massive future tax savings.
Understanding "True Cost"
When I say donating $100,000 has a "true cost" of $63,000, here's what I mean:
You're giving up $100,000 worth of stock. BUT you're saving $37,000 in taxes (your deduction). So the actual hit to your net worth? $63,000.
It's like the government is subsidizing 37% of your donation.
Compare that to selling first, where your true cost is $71,718 to get only $76,438 to charity.
You pay more. Charity gets less. Only the IRS wins.
That's backwards.
What's a Donor Advised Fund (DAF)?
Think of it as a charitable savings account.
You contribute assets (stock, real estate, crypto, business interests) and get an immediate tax deduction. The assets are sold tax-free inside the fund. Then you recommend grants to any qualified charity, whenever you want.
You fund it in a high-income year. You distribute it over time.
The money grows tax-free while you decide where to give.
Who This Works For
This strategy is powerful if you:
- Have appreciated stock (especially company stock, index funds, or individual positions held for years)
- Are charitably inclined
- Make enough to itemize deductions (or can "bunch" multiple years of giving)
- Want to maximize impact while minimizing cost
The beauty? It works the same whether you're a business owner or a W-2 employee. Same tax code, same benefits.
The Process Is Simple
- Open a Donor Advised Fund (Fidelity Charitable, Schwab Charitable — takes 15 minutes)
- Transfer appreciated stock directly (don't sell it first)
- Get your tax documentation for year-end
- Recommend grants to charities over time
That's it.
Remember: If you're planning to have capital gains AND make charitable donations in the same year, you're doing it wrong. Combine them through a DAF instead.
Time to Move
We're in the last few weeks of 2025.
If you have appreciated stock and you're planning to give to charity, this is the year to act.
The difference between writing checks and using a DAF? Thousands in tax savings. Sometimes tens of thousands.
More money to charity. Less cost to you. Less money to the IRS.
Everyone wins except the tax man.
This is exactly what we help clients with at Better Bookkeeping.
We find the opportunities in your tax situation that make the biggest difference. Not aggressive strategies. Not gray areas. Just smart, straightforward planning that keeps more money working for you and your causes.
Want to talk through your specific situation before year-end?
Schedule a call here and let's make sure you're optimized — paying exactly what you need to, not a dollar more.