With the season of giving fast approaching, charitable contributions can support meaningful causes while also creating potential tax benefits for the donor. However, the method of contribution can make a significant difference. Cash gifts, appreciated investments, donor-advised funds, and qualified charitable distributions can affect taxable income and charitable deductions differently. Additionally, the rules governing charitable deductions changed in 2026. For those nearing or living in retirement, reviewing gifting strategies before year-end may uncover tax advantages that cash donations miss.
What the 2026 Tax Changes Mean for Charitable Giving
As of 2026, taxpayers who do not itemize may claim a deduction of up to $1,000 in qualifying cash contributions, or $2,000 for married couples filing jointly, when made to eligible public charities. For those who itemize, only the portion of charitable contributions that exceeds 0.5% of adjusted gross income (AGI) is deductible, a product of the One Big Beautiful Bill Act (OBBBA). Taxpayers in the 37% federal tax bracket also face a new limit that effectively caps the tax benefit of itemized deductions at $0.35 per dollar.
Meanwhile, the 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. Households whose itemized deductions are close to these amounts may benefit from reviewing when and how they make charitable contributions. Depending on a donor’s financial circumstances, cash, appreciated investments, a donor-advised fund, or a QCD may provide different tax advantages.
Cash Gifts: Simple and Direct
Cash is one of the simplest ways to support a qualified charity. Donors know exactly how much they are giving, and recordkeeping is relatively straightforward. With the new 2026 deduction available to eligible non-itemizers, taxpayers who take the standard deduction may find cash contributions more attractive. However, investors with substantial gains in taxable accounts may find additional tax advantages in donating appreciated assets.
Appreciated Securities: Donate Investments Directly
Investors can donate appreciated stocks, bonds, or mutual fund shares directly to a qualified public charity rather than selling the assets and donating the cash proceeds. The donor generally avoids capital gains tax on the appreciation of investments held longer than one year. When itemizing, the donor may generally deduct the fair market value of the gift, subject to applicable limits and requirements.
This strategy may be particularly useful for those nearing or in retirement who have accumulated highly appreciated investments. Donating a concentrated holding can also help rebalance a portfolio without triggering the capital gains tax that a sale could generate.
Donor-Advised Funds: Separate the Gift From the Grant
Investors who want to donate appreciated assets but prefer greater flexibility over when charities receive the money can consider a donor-advised fund (DAF). A donor contributes cash or other assets to a sponsoring charitable organization, receives any available deduction in the year of the contribution, and later recommends grants to qualified charities. Contributed assets legally belong to the sponsoring organization. The donor cannot take them back.
Through a DAF, donors can make a larger charitable contribution in the current tax year and decide later which organizations receive the funds. Donors can also contribute appreciated securities to a DAF, potentially avoiding capital gains tax on the appreciation.
QCDs: An Option for IRA Owners Over 70½
For IRA owners age 70½ or older, charitable giving offers another option. A qualified charitable distribution allows funds to move directly from an IRA to an eligible charity. The 2026 QCD limit is $111,000 per individual, and a QCD can satisfy all or part of an individual’s RMD for those subject to one. The eligible amount is excluded from taxable income rather than claimed as a charitable deduction.
Because an eligible QCD does not increase AGI, it may offer tax advantages even for someone who takes the standard deduction. QCDs generally cannot be made to donor-advised funds.
Bunching: Concentrate Giving Into Selected Years
The new 2026 deduction rules may also give taxpayers reason to reconsider when they make charitable contributions. Instead of donating the same amount every year, some households combine several years of planned charitable contributions into one tax year. This “bunching” strategy may allow taxpayers to itemize deductions in the contribution year and take the standard deduction in subsequent years.
A DAF can make bunching easier because the donor can make one larger deductible contribution while distributing grants over several years. With the new 0.5% AGI floor in effect, households may want to compare concentrated giving with smaller annual gifts.
Making Charitable Giving Part of the Financial Plan
Year-end giving is rooted in generosity, but a little planning can help those charitable dollars go farther. The method and timing of a gift can affect taxes, investments, retirement income, and the legacy a donor hopes to leave. SHP Financial helps clients bring those decisions together through the five worlds of retirement planning: income, investment, tax, healthcare, and legacy. This season, give generously, but give strategically. Contact SHP Financial today for a complimentary review of your finances and learn how charitable giving can support the causes you care about and the financial future you have worked to build.
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