Updated November 2026 for the charitable giving rules that took effect January 1, 2026.
As we get closer to the end of the year, charitable giving is often top of mind for clients around the holiday season. Some clients dedicate a percentage of their income, a set monthly amount or give spontaneously when they feel the time is right to give to their organization of choice.
Most clients are aware that there is a tax break associated with charitable giving. However, most don't realize that they probably aren't getting the full benefit. The IRS lets you deduct charitable donations when you itemize deductions (Schedule A) instead of taking the standard deduction. For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Unless your mortgage interest, state and local taxes, and gifts add up to more than that, your donations do little or nothing for your tax bill.
The tax law signed on July 4, 2025 (often called the One Big Beautiful Bill Act) changed the math again starting in 2026. Some changes help everyday donors. Others make the deduction less valuable for high earners, which makes how and when you give more important than ever.
What changed in 2026
| Change | Who it affects | What it means |
|---|---|---|
| 0.5% of AGI floor | Anyone who itemizes | Only gifts above 0.5% of your AGI are deductible. At $400,000 of AGI, the first $2,000 of gifts each year gets no deduction. |
| Non-itemizer deduction | Anyone who takes the standard deduction | Deduct up to $1,000 ($2,000 married filing jointly) of cash gifts on top of the standard deduction. Gifts to donor advised funds, supporting organizations and gifts of stock don't qualify. |
| 35% cap on itemized deductions | Taxpayers in the 37% bracket | Itemized deductions, including gifts, now save at most about 35 cents per dollar instead of 37 cents. |
| 60% of AGI limit for cash made permanent | Large cash donors | Cash gifts to public charities can still be deducted up to 60% of AGI. Stock gifts remain limited to 30% of AGI. |
One detail on the floor: the amount it disallows is usually lost for good. It only carries forward to future years if your gifts that year also exceed the AGI percentage limits above.
Strategies under the new rules
1. Bunch your giving with a Donor Advised Fund. The 0.5% floor makes bunching more valuable than before. If you itemize every year, you lose the first 0.5% of AGI every year. If you pre-fund several years of giving into a Donor Advised Fund in one year, you pay the floor once. You then grant money to your charities from the DAF on whatever schedule you want, and the deduction counts in the year you fund the account.
For example, say you normally give $5,000 a year to various charities, your church and your alma mater. Instead, you contribute $25,000 to a DAF in one year, itemize that year, and take the standard deduction in the other years.
2. Give appreciated stock instead of cash. Transferring stock you've held more than a year into a DAF avoids capital gains tax on the growth. You also deduct the full market value, up to 30% of AGI. This hasn't changed, and it compounds the benefit of bunching.
3. Time the big gift for a high-income year. We often see a jump in tax bracket when clients receive a large commission, RSUs vesting at a higher stock price, or proceeds from selling equity in a tech company. Bunching into those years lets the deduction offset income at your highest rate.
4. In standard-deduction years, write the check directly. Starting in 2026, married couples who don't itemize can deduct up to $2,000 of cash gifts ($1,000 for single filers). Pair this with bunching: in your DAF-funding year you itemize, and in the off years you give up to $2,000 in cash directly to charities to pick up the new deduction. Note that grants from your DAF don't count, since the deduction was already taken when the DAF was funded. Gifts of stock don't count either.
5. If you're 70½ or older, consider a Qualified Charitable Distribution. A QCD sends money directly from your IRA to a charity. It's excluded from income rather than deducted, so the 0.5% floor and the 35% cap don't reduce it, and it can count toward your required minimum distribution. QCDs can't go to a Donor Advised Fund, and there is an annual dollar limit that is indexed for inflation.
6. In the 37% bracket, run the numbers before accelerating. Your gifts now save about 35% instead of 37%. Bunching and gifting stock still work. The deduction is just worth slightly less than your top rate.
Two ways to gift your appreciated investments or company stock
Shared assumptions: married filing jointly, $700,000 AGI, 35% federal bracket, 2026 rules. Without a large gift, the couple takes the $32,200 standard deduction. Their only other itemized deduction is $10,000 of state and local taxes. They own shares of their company's stock, held more than a year, with a basis of one-third of its value. Gains are taxed at 20% plus 3.8% Net Investment Income Tax.
Scenario 1: Sell $15,000 of company stock each year for 10 years and give cash to charities
Each year's sale has a $10,000 long-term gain. Federal tax: $10,000 × 23.8% = $2,380 per year, or $23,800 over 10 years.
They take the standard deduction, but the new non-itemizer deduction lets them deduct $2,000 of the cash gifts each year. Savings: $2,000 × 35% = $700 per year, or $7,000 over 10 years.
Net benefit to charity = $150,000
Donor out of pocket = $150,000 + $23,800 − $7,000 = $166,800
Scenario 2: Fund a DAF with $150,000 of company stock in 2026 and grant it out over 10 years
No shares are sold, so there is no capital gains tax.
The 0.5% floor removes the first $3,500 of the gift (0.5% × $700,000), leaving a $146,500 charitable deduction.
Itemized deductions total $156,500 ($146,500 + $10,000 SALT). That is $124,300 more than the standard deduction they give up.
Tax savings in 2026: $124,300 × 35% = $43,505.
In years 2–10 they take the standard deduction. DAF grants don't qualify for the $2,000 non-itemizer deduction.
Net benefit to charity = $150,000
Donor out of pocket = $150,000 − $43,505 = $106,495
The charities receive the same $150,000 either way. The DAF approach costs the donor about $60,300 less, a 36% reduction. The new rules trimmed the advantage compared with our 2024 version of this example (the 0.5% floor costs this couple $1,225 in tax), but bunching still wins by a wide margin.
If this couple were in the 37% bracket, the 35% cap on itemized deductions would apply. Their savings rate on the gift would be about 35%, not 37%.
The bottom line
The new rules reward planning. Bunching gifts into a Donor Advised Fund, gifting appreciated stock, and picking up the $1,000/$2,000 cash deduction in off years can stretch the same dollars much further for both you and the causes you care about. To count for 2026, a DAF contribution has to be completed by December 31, and stock transfers can take a few days, so start early. Tis the Season to be Merry!
Fine print: these scenarios are hypothetical and may not apply to you or your situation. They are simplified to federal income tax and ignore state tax, AMT, phase-outs and other interactions. Please consult a tax professional about how these rules apply to you. Also consider your tax bracket, use of the standard deduction, AGI limits on gifts, the 0.5% floor, the 35% cap for the 37% bracket, AMT and your long-term capital gains bracket. Tax law can change.
Sources
26 U.S. Code § 170: 0.5% floor and carryforward rule
26 U.S. Code § 68: 2/37 reduction on itemized deductions, effective for tax years after Dec 31, 2025
IRS: One, Big, Beautiful Bill provisions: non-itemizer cash deduction and DAF exclusion
IRS IR-2025-103: 2026 standard deduction and brackets
