Tax-Smart Giving: Make Your Generosity Go Further

Most people give because they want to. The deduction is not the reason. But how you give — which asset, through which vehicle, in which year — determines how much reaches the causes you care about and how much stays with the Treasury. That question carries more weight in 2026, because the rules changed.

What changed for 2026

Three provisions of the 2025 tax act (P.L. 119-21) took effect for tax years beginning after December 31, 2025.

A floor under the deduction. New Internal Revenue Code §170(b)(1)(I) allows an itemizer's charitable deduction only to the extent total gifts exceed 0.5% of the contribution base — adjusted gross income, for nearly everyone. On $800,000 of AGI, the first $4,000 of giving now produces no deduction at all.

The detail that matters is what happens to that disallowed slice. Under §170(d)(1)(C), it is added to your five-year carryforward only in a year when that category of giving already exceeded its AGI ceiling. Donors who give comfortably within the ceilings — most donors — simply lose it.

A cap on what a deduction is worth. Section 68, rewritten, reduces itemized deductions by 2/37 of the lesser of two amounts: total itemized deductions, or the amount by which taxable income — computed before those deductions — exceeds the 37% bracket threshold ($768,700 for joint filers, $640,600 for single filers in 2026). Note the add-back: households well under the threshold on their tax return can still be caught. The effect is to shrink every itemized dollar by a factor of 35/37, so a deduction worth 37 cents to a top-bracket donor is now worth 35, and one worth 35 cents in the bracket below is worth about 33.

A deduction for non-itemizers. New §170(p) permanently allows up to $1,000, or $2,000 on a joint return, for cash gifts by taxpayers who do not itemize. It is cash only — appreciated securities do not qualify — and gifts to donor-advised funds and supporting organizations are excluded. The 0.5% floor does not apply to it.

For context, the 2026 standard deduction is $32,200 for joint filers and $16,100 for single filers, plus $1,650 for each spouse age 65 or older, or $2,050 for an unmarried filer that age. Steady annual giving that once cleared the threshold may no longer do so.

Give the appreciated share, not the check

If you itemize, hold a publicly traded security at a gain, and have held it more than one year, giving the shares themselves is usually better than selling and writing a check.

You deduct the fair market value of the shares and do not recognize the capital gain — which at the top federal rate means avoiding 20% plus the 3.8% net investment income tax, before state tax. The charity sells without paying tax on the gain. The same dollar of generosity costs you meaningfully less.

The exceptions are worth naming. Property held a year or less is deductible only at basis, as is most appreciated property given to a private foundation. Gifts of appreciated property to a public charity are capped at 30% of AGI, against 60% for cash, with the excess carried forward five years. And if you do not itemize, the calculus reverses: cash is the only gift that qualifies for the new $1,000 or $2,000 deduction.

The paperwork is lighter than most people expect. Non-cash gifts above $500 require Form 8283, but the qualified appraisal otherwise required above $5,000 does not apply to publicly traded securities. As with any gift of $250 or more, you need a contemporaneous written acknowledgment from the charity, obtained by the time you file.

Two practical notes. Transfer the shares in kind, and well before a pending sale becomes a near certainty. If the donee's right to the proceeds has effectively become fixed — a tender offer substantially subscribed, a merger approved — the gain can be taxed to you notwithstanding the transfer. The analysis is fact-specific, which is exactly why it pays to move early.

Second, if you want to keep the position, you may buy the shares back immediately — the wash-sale rule applies only to losses, so the repurchase resets your basis higher at no current tax cost. The new lot does start a fresh one-year holding period, so it will not support a fair-market-value deduction until that year has run.

Bunch several years of giving into one

The floor and the higher standard deduction both reward concentration. Giving $30,000 in one year rather than $10,000 in each of three absorbs the 0.5% floor once instead of three times, and is far more likely to clear the standard deduction.

A donor-advised fund makes that practical without forcing the charities to wait. You fund the account in the year that suits your tax picture — often a year with unusually high income, an exercise of options, or a business sale — and take the deduction then. Grants go out on whatever schedule you prefer afterward. One caveat on spike-income years: because the floor is a percentage, a much larger AGI produces a much larger floor.

Contributions to a sponsoring organization carry the same AGI ceilings as gifts to any operating public charity: 60% for cash, 30% for appreciated securities. The deduction is fixed in the year you fund the account, not when grants are recommended. These accounts also carry their own substantiation rule — a contemporaneous written acknowledgment from the sponsor confirming it has exclusive legal control over the assets.

After 70½, consider giving from the IRA first

For those past age 70½ who hold traditional IRA assets, the qualified charitable distribution is often the most tax-efficient dollar to give — and 2026 sharpened the case.

You may direct up to $111,000 in 2026 from a traditional IRA to charity. It is a per-person limit, so spouses with their own IRAs can move $222,000 combined. Because a QCD is an exclusion from income rather than a deduction, it steps around every obstacle described above: no 0.5% floor, no AGI percentage ceiling, no §68 haircut, and no need to itemize. It also lowers AGI, which can matter for Medicare premium surcharges and other income-driven thresholds.

The age test is 70½ on the date of the distribution. QCDs count toward required minimum distributions, which begin at 73 and at 75 for those born in 1960 or later — so there is a multi-year window in which QCDs remove IRA dollars from your lifetime income with no RMD to offset.

The rules are strict. The transfer must go directly from the IRA trustee to the charity. You may receive nothing in return — not even event tickets. Donor-advised funds, supporting organizations, and private foundations are not eligible recipients, which makes the QCD and the donor-advised fund alternative strategies rather than complementary ones. Ongoing SEP and SIMPLE IRAs do not qualify, and neither do employer plans such as a 401(k); those must be rolled to an IRA first.

A once-in-a-lifetime election also permits up to $55,000 of the 2026 limit to fund a charitable gift annuity or charitable remainder trust. It counts against the $111,000 rather than adding to it, and the receiving entity must be funded exclusively with QCD dollars — so it cannot be added to a trust you already have.

Coordinate with the estate plan

The 2026 federal estate and gift exclusion is $15 million per person, with a matching generation-skipping transfer exemption and a $19,000 annual gift exclusion. At that level, fewer families give primarily to reduce estate tax, which shifts the conversation toward what the money is actually for.

Interest rates shape which structures work. The §7520 rate used to value split-interest gifts is 5.2% as of August 2026, high by the standards of the past fifteen years. That favors charitable remainder trusts and charitable gift annuities — a higher rate produces a larger charitable remainder value and makes the 10% remainder requirement easier to meet, with the effect strongest for annuity-based structures. It works against charitable lead annuity trusts, which are more attractive when rates are low.

A charitable remainder trust deserves a look if you hold a concentrated, low-basis position you would like to diversify without triggering the full gain at once. The trust must pay out between 5% and 50% each year — of the initial value for an annuity trust, of the annually revalued balance for a unitrust — and the remainder must be worth at least 10% at funding. These are not simple instruments; evaluate them alongside your attorney and CPA rather than in isolation.

Where families usually start

Depending on circumstances, the order of operations often looks like this. Give appreciated securities rather than cash, if you itemize. Past 70½, satisfy giving from the IRA first, up to the annual limit. Concentrate the rest into the years when income is highest, using a donor-advised fund to separate the tax year from the grant year. Then revisit whenever income changes materially — a liquidity event, a retirement, an exercise of equity compensation.

Charitable planning works best when it is decided in advance rather than in late December. If your giving is meaningful in size, or a liquidity event is on the horizon, it is worth mapping out before the year gets away from you.