2026 Changes in Tax Laws on Charitable Deductions
By Kevin G. Henry
Several changes made by the July 4, 2025 One Big Beautiful Bill Act (OBBBA) went into effect for 2026 that affect deduction of charitable gifts.
A. Non-itemized Charitable Deduction. The best new and universally beneficial addition to promote charitable giving was creation of an above-the-line $1,000 single/$2,000 married charitable deduction for Non‑Itemizers. This deduction directly reduces your adjusted gross income (AGI), saving both federal income tax and also for Seniors, potentially reducing the amount of your Social Security benefits that are taxable.
B. Increased Standard Reduction. OBBBA also made a permanent increase in the Standard Deduction to $16,100 single/$32,200 married filing jointly, indexed for inflation in the future.
C. Senior Deduction. Through 2028, an additional Senior (over age 65) Deduction of $6,000 for singles with income below $75,000 and married couples with income below $150,000 is available, if claimed on a new page added to your tax return (and the deduction phases down or reduces above those income levels). The combination of these two changes increases the likelihood that most Seniors will no longer itemize deductions to expressly take charitable deductions on Schedule A.
Strategy for Seniors to Make Charitable Gifts
Because Because of the increased unlikelihood of itemizing deductions, for Seniors already taking IRA withdrawals, the strategy of using Qualified Charitable Deductions (QCDs) to make direct charitable or church gifts from your IRA that count as RMD withdrawals (without counting as taxable income), remains the most tax-efficient way to make charitable gifts, period. [1] For 2026, the limit for deductible QCD gifts from your IRA is $111,000.
Strategies for People of any Age
Bundling Charitable Deductions. In order to itemize deductions with the higher standard deduction threshold, it can be advantageous for you to “bundle” and make all charitable contributions every other year, to help you amass larger deductions and exceed your standard deductions amount. For example, in Year 1 you would take the standard deduction with little or no charitable giving, but save up the amount of planned gifts for Year 1 and then in Year 2 give the equivalent of two (2) years charitable contributions and thus be able to itemize your deductions on Schedule A in Year 2. [2] To help your charitable recipient’s budget, maybe give the Year 1 gift in January of Year 2, and the Year 2 gift amount in December of Year 2.
Donor-Advised Fund. An alternative to “bundling” is to have your stockbroker set up a Donor-Advised Fund (“DAF”) account, into which you can periodically transfer cash or stocks (with unrealized gain appreciation in value). The amount you transfer to the DAF is deductible as a charitable contribution (if it puts you above the standard deduction) in the year of the transfer. Then you may direct charitable gifts out of the DAF in any later year (but you only get the deduction once). The DAF account remains invested and may grow tax‑free until distributed out, increasing the impact of your gift. All major stockbroker firms offer DAF accounts, at minimal cost.
Direct Stock Gift Transfer. A great tax‑avoidance tax strategy is to make direct stock transfer gifts to a church or charity. If you own a regular securities brokerage account (not retirement), you can instruct your broker to make direct stock transfers as a gift to a church or charity. Where stock has Unrealized Gain shown on your account statement, meaning that it has increased or appreciated in value above your original cost, if you personally sold this stock in order to use the net proceeds to fund a charitable donation, you would pay capital gains tax on the increase in value. By making the direct stock gift to the church or charity, the charitable recipient pays zero tax and receives the maximum full current fair market value for the stock given, enabling the amount of your gift to be larger than if you sold the stock yourself and had to pay tax before making a cash donation. Your church or charity will provide you or your stockbroker its own broker account information for the stock transfer. Stock gifts are deductible if you are eligible to itemize.
New Limits or Maximum for Charitable Deductions. For itemizers, you can only deduct an amount of total charitable gifts in excess of 0.5% of your AGI. (For most itemizers, this should only mean that the first $1,000 or less of charitable gifts are nondeductible.) OBBBA did raise the maximum percentage of charitable deductions that may be taken in the year of the gifts to 60% of AGI (from 50%). The unused portion of charitable gifts can be carried forward as a deduction for future tax returns.
Strategies for Charitable Giving at your Death
Designating a church or charity as a beneficiary of a portion of your retirement account (IRA, 401k or 403b) – if not entirely needed for the later support of your spouse or a minor child – is an ideal way to forever avoid income tax on the tax deferred retirement account, since the charity pays zero tax. You can do this on a Beneficiary Designation form provided by your retirement plan administrator.
Another reason you might want to use your taxable retirement account for charitable gifting is that non‑spouse beneficiaries of retirement accounts like children or grandchildren have to pay income tax on the entire amount of your retirement account they inherit within ten (10) years. They cannot “stretch out” the RMD payments over their life expectancy. Only your spouse can do that, and whatever is left in the retirement account at the death of your spouse will then be subject to the 10‑year non‑spouse beneficiary RMD rule.
When doing income tax planning for gifts at death to your children and grandchildren, be aware that assets like your house, other real estate or a regular stock account receive a “stepped up” valuation for tax basis to current fair market value at your death. A charity does not need this increase in tax basis, but it would greatly benefit your spouse, children or grandchildren to inherit such property at stepped‑up value in case they later sell the inherited property. Therefore, if you have charitable inclinations at your death, think first about using tax‑deferred retirement accounts for death charitable giving, and leaving other appreciated property held in your individual name or in a Revocable Trust to family members at your death.
Important Note: It makes no sense to use a Roth IRA or Roth 401k for your charitable giving – you have already paid tax on it and it can go to your spouse and/or family members completely tax‑free.
Disclaimer
Always consult with your accountant, tax preparer or investment advisor before you make decisions about stock gifts, QCDs from an IRA, bundling charitable gifts, or other tax planning. The above are only general concepts that may not be of significant benefit or suitable for your particular income and tax situation or objectives.
Kevin G. Henry retired after 34 years with Sturgill Turner practicing business and trusts and estates law. He remains as General Counsel to the Firm. This article is intended as a summary of some federal tax provisions and does not constitute legal advice..
[1] Report the QCD amount on the line after checking box 4c on page one of your Form 1040. Do not claim a QCD charitable gift as a deduction on Schedule A, Itemized Deductions.
[2] Schedule A itemized deductions may now include (a) up to $40,000 for state and local income tax and property taxes (the “SALT deduction”), plus (b) home mortgage interest you pay, and (c) up to $10,000 auto loan interest you pay. So if adding your charitable gifts would cause the total of all those deductions to be greater than the standard deduction amount, you can itemize for that year. The SALT and auto loan interest changes may help two-income families owning homes be eligible to itemize deductions above the standard deduction.