Many retirees who tithe are unintentionally giving away far too much to the IRS. If you are tithing from your checking account, it is often like paying tax on a dollar only to turn around and give that same post-tax dollar away.

If you are approaching retirement or already in it, here is how to restructure your tithing program to stop overpaying on taxes. You can also watch my video on this topic here.

1. Stop Giving Cash

The most common mistake is setting up a regular draw from your checking or savings account to your church. Instead, look at your brokerage or trust accounts for appreciated stock.

By donating highly appreciated shares directly to your church, neither you nor the organization pays the capital gains tax. While only about 10% of church members donate stock, it often accounts for the vast majority of church funding because high-net-worth individuals understand this tax advantage.

2. The "Bunching" Strategy

With the standard deduction now over $30,000 for married couples filing jointly, many people giving $10,000 or $15,000 a year receive zero federal tax benefit for their generosity.

The solution is Bunching:

• You "bunch" two or three years' worth of gifts into a single tax year to exceed the standard deduction.

• To keep your actual church support consistent, you use a Donor-Advised Fund (DAF).

3. Use a Donor-Advised Fund (DAF)

A DAF acts like a dedicated charitable "holding tank". You get an immediate tax deduction when you contribute cash or (ideally) appreciated stock, but you can distribute the funds to your church on your usual monthly or quarterly schedule.

Where to open one:

• Large Corporations (Fidelity/Schwab): Slick technology and low fees, but you lose the personal relationship.

• Local Community Foundations: Slightly higher fees, but you get a local contact to help you navigate transfers and distributions.

Pro-Tip: Be mindful of deduction limits. You can generally only deduct cash gifts up to about 50% of your income, while appreciated stock deductions are capped at roughly 30%.

4. Transition to QCDs at Age 70½

Once you reach age 70½, you can utilize Qualified Charitable Distributions (QCDs).

A QCD allows you to send money directly from your pre-tax IRA to your church. Because the money never hits your bank account, it doesn't count as taxable income. It’s an incredibly efficient way to satisfy your tithe while keeping your adjusted gross income low.

Important Note: You must wait until your actual 70½ "half-birthday" to start this; it is not based on the calendar year you turn 70.

The Integrated Strategy

For a high-income pre-retiree, the "perfect" plan looks like this:

1. Age 60–70: Bunch appreciated stocks into a Donor-Advised Fund while your income is high to maximize deductions.

2. Age 70½+: Switch your tithing program to Qualified Charitable Distributions from your IRA.

Restructuring your giving doesn't just help your bottom line—it ensures more of your hard-earned money goes toward your mission rather than the government's.

At Barrett FP LLC, we specialize in helping DIY investors optimize their retirement and giving strategies. Let’s make sure your tithe is working as hard as you did to earn it.

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