Here’s something that might surprise you: starting in 2026, many of your charitable donations won’t be fully tax-deductible anymore. Combine that fact with markets near all-time highs, and you’ve got what might be the best charitable giving opportunity we’ll see for years.
The 2026 Tax Changes: What You Need to Know
As we recently detailed in our analysis of the One Big Beautiful Bill Act (OBBBA), significant changes are coming to charitable deductions in 2026. But here’s the crucial detail: these changes affect itemizers and non-itemizers differently.
If you itemize deductions: Starting January 1, 2026, your charitable deductions will be subject to a new floor of 0.5% of Adjusted Gross Income (AGI). You can only deduct the amount that exceeds the threshold.
Say your income (AGI) is $500,000 and you donate $10,000 to charity in 2026. Only $7,500 would be deductible. Why? Because this is the amount exceeding $2,500, which is 0.5% of your AGI. How about someone with a $1 million income? The first $5,000 of charitable giving provides zero tax benefit. As an added drawback, there’s also a new rule for 2026 that effectively caps the benefit of deductions at 35% even if your tax bracket is higher than that.
This makes 2025 the last year itemizers can receive full deductibility for every dollar donated—a compelling reason to think strategically about your giving timeline.
If you take the standard deduction: Here’s where it gets interesting. If you take the standard deduction and donate cash, you might actually want to wait until 2026, when a new provision kicks in allowing up to $1,000 in charitable donations for cash donations for single filers ($2,000 for joint filers) even when taking the standard deduction. This “above-the-line” deduction isn’t subject to that 0.5% floor, making it a nice benefit for those who don’t itemize.
Market Highs Create Additional Opportunities
Beyond the tax law changes, let’s talk about why this moment in the market cycle makes charitable giving especially powerful. With equity markets near all-time highs, many investors are sitting on positions with substantial embedded gains. This creates a nice opportunity to:
- Avoid the Capital Gains Tax: When you donate long-term appreciated securities directly to charity instead of selling them first, you sidestep capital gains tax on all that appreciation.
- Rebalance Without the Tax Bill: Has your portfolio gotten a bit lopsided after this market run? Maybe those tech stocks now represent 40% of your portfolio instead of your target 25%? Donating the appreciated shares lets you rebalance without Uncle Sam taking a cut.
- Reset Your Cost Basis: If you have cash on the sidelines, after donating the appreciated shares, you can turn around and immediately reinvest some of that cash, resulting in a portfolio with a higher cost basis. That means less capital gains tax down the road when those new investments are sold.
The Power of Frontloading: Donor-Advised Funds
One strategy involves using a Donor-Advised Fund (DAF) to frontload multiple years of charitable giving into 2025. Here’s how it works:
Instead of giving $20,000 annually to charity over the next five years, you contribute $100,000 to a DAF in 2025. Depending on your tax situation, you get the full $100,000 tax deduction this year (while it’s still fully deductible), then grant out $20,000 per year to your favorite charities over time.
Here’s the math: if you wait and give $20,000 annually starting in 2026, and you have $500,000 in AGI, you’d lose $2,500 in deductions every single year to that new floor. Over five years, that’s $12,500 in lost deductions—potentially $4,375 in additional taxes at the 35% bracket. By frontloading into a DAF, you capture the full deduction value while maintaining complete control over the timing of your actual charitable distributions.
When Your IRA Might Be the Better Giving Vehicle
Before you rush to donate appreciated stock, let’s talk about a strategy that might work even better for some of you: Qualified Charitable Distributions (QCDs) from your IRA.
If you’re 70½ or older, you can donate up to $108,000 (2025 figure) directly from your IRA to charity. These QCDs don’t count as taxable income (unlike regular IRA withdrawals), and they count toward your IRA’s required minimum distribution.
Here’s when a QCD might beat an itemized deduction:
- You’re already near the threshold for Medicare premium surcharges (IRMAA), and additional income would push you over
- You take the standard deduction or don’t have many other itemized deductions beyond charity
- The QCD would help you avoid having Social Security benefits taxed
- You’re subject to the Net Investment Income Tax and want to keep your AGI down
The beauty of QCDs? They’re not affected by these new 2026 changes. So if you’re in this age bracket and charitably inclined, QCDs remain a powerful tool regardless of the new AGI floor.
The Bottom Line
Sometimes the calendar and the tax code align to create unique opportunities that have expiration dates. For itemizers who are charitably inclined, 2025 offers a unique chance to plan your charitable giving strategy with the help of your tax professionals and the Glassman team.
These laws and provisions are subject to change at any time, and your individual circumstances may vary. Therefore, we recommend consulting with your CPA to ensure these strategies are applicable to your situation.
