This is the second post in a three-part year-end tax series. Part 1 covered tax-loss harvesting. Part 3 covers retirement contributions.
If you give every year, the way you give needs a second look.
New rules took effect on January 1, 2026. They shrink the tax benefit of giving for many donors, especially at higher incomes. You can still offset much of it, but you have to plan before December 31.
What Changed
A floor for itemizers. The first 0.5% of your adjusted gross income in gifts no longer earns a deduction. At $500,000 of AGI, that is the first $2,500. Give $20,000 and $17,500 is deductible. At $1 million of AGI, the first $5,000 is gone.
A cap for the top bracket. If you are in the 37% bracket, your itemized deductions, charitable gifts included, save you 35 cents on the dollar instead of 37. On a $100,000 gift, that is $35,000 in tax savings instead of $37,000.
A new deduction if you don't itemize. Take the standard deduction and you can also deduct up to $1,000 in cash gifts to qualifying charities, or $2,000 for joint filers. Gifts to donor-advised funds don't count. The 2026 standard deduction is $16,100 single and $32,200 married filing jointly.
One rule that held. The 60% of AGI limit on cash gifts to public charities is now permanent.
Four Moves Worth Making
1. Qualified Charitable Distributions
If you are 70½ or older, this is often the best way to give.
You send up to $111,000 per person in 2026 straight from your IRA to a qualified charity. The money stays out of your taxable income. It counts toward your required minimum distribution. And since it never touches your income, the new floor never touches it either.
A QCD has to come from an IRA. It cannot come from a 401(k), 403(b), or any other workplace retirement plan. If your savings sit in a plan at work, you can roll the money into an IRA first, then make the QCD from there.
A lower AGI also helps you stay under Medicare premium surcharge thresholds down the road.
Two limits. A QCD cannot go to a donor-advised fund, and you cannot deduct it on top of the exclusion.
You can have your custodian mail the QCD check to you, as long as it is made payable to the charity. That gives you control. You deliver it yourself and know it arrived, instead of hoping the post office gets it there in time.
Watch for a donation letter from the charity confirming it received your gift. Ask the charity to note that the money came from your IRA as a qualified charitable distribution. Keep that letter with your tax records. Your CPA will want it when the 1099-R shows up in January.
2. Appreciated Stock Instead of Cash
Give shares you have held longer than a year that have grown in value. You skip the capital gains tax on the growth, and you deduct the full market value, subject to the new floor and cap.
Keep this separate from Part 1. Give away the winners. Harvest the losers.
3. Bunching
The floor hits you every year, so small annual gifts pay that cost over and over.
Combine several years of giving into one year. You absorb the floor once, and you may clear the standard deduction so itemizing finally pays off.
4. Donor-Advised Funds (DAF)
A DAF pairs well with bunching. You fund it in one year, take the deduction that year, and recommend grants to charities over time. It works especially well with appreciated stock or in a high-income year.
Open the account early. Firms like Schwab and Fidelity offer these accounts. Once yours exists, sending stock to it is easy if you already hold accounts at that firm. Year-end is the busiest time of year for DAFs, and new account openings take the longest. Setting one up before December saves you time and stress.
Start Early
Stock transfers, DAF gifts, and QCDs all run through custodians and paperwork. A gift you start on December 29 can miss the deadline.
Give yourself several weeks, not several days.
We strive to have QCDs, DAF gifts, and stock gifts done by early December. That keeps us clear of the deadlines custodians set.
For a QCD, the check must be made out to the charity, so confirm the charity qualifies before you send anything.
Your Checklist
• Estimate your 2026 AGI so you know your floor
• Decide whether you will itemize or take the standard deduction
• Identify appreciated stock you have held over a year
• If you are 70½ or older, calculate your RMD and decide how much goes to charity
• Collect the charity's confirmation letter for any QCD
• Decide whether bunching or a donor-advised fund fits
• Start transfers by early November
Up Next
Part 3 covers retirement contributions, including the new 2026 limits and a rule change for higher earners.
Frank
McKinley Carter Wealth Services
This content is for educational purposes and is not tax or legal advice. Please consult your tax professional about your individual situation.