A guide to donor-advised funds, QCDs, and other strategies that still deliver tax-efficient charitable impact
The Problem: Charitable Giving and the Standard Deduction
For decades, charitable giving and tax deductions went hand in hand. You wrote a check to your favorite charity, deducted it on your return, and both you and the organization benefited. That equation has fundamentally changed for most American taxpayers.
The standard deduction for 2026 is $32,200 for married couples filing jointly and $16,100 for single filers. With the OBBBA making these higher amounts permanent, roughly 90% of taxpayers take the standard deduction rather than itemizing. For these households, charitable contributions — no matter how generous — produce zero direct tax benefit.
The default approach of writing a check and assuming you’ll get a deduction is no longer effective for most people. The tax code now rewards more deliberate, structured approaches to giving.
What Changed in 2026
The OBBBA introduced several provisions that directly affect charitable giving strategies. Understanding these changes is essential for making informed decisions.
New Non-Itemizer Charitable Deduction
Beginning in 2026, taxpayers who take the standard deduction can claim an above-the-line deduction of up to $1,000 for single filers ($2,000 for married couples filing jointly) for cash gifts made directly to qualified public charities. This is a permanent provision that provides a modest incentive for everyday givers. However, it comes with important limitations: it applies only to cash donations, not appreciated securities or other property, and it does not apply to contributions made to donor-advised funds or private foundations.
New 0.5% AGI Floor on Charitable Deductions
For taxpayers who do itemize, charitable contributions are now deductible only to the extent they exceed 0.5% of adjusted gross income. For a household with $300,000 in AGI, the first $1,500 of charitable giving produces no deduction. This floor did not exist before 2026 and effectively raises the threshold for when charitable giving becomes tax-efficient for itemizers.
Deduction Value Capped at 35% for Top Bracket
For taxpayers in the 37% federal bracket, the tax benefit of all itemized deductions — including charitable contributions — is now capped at 35 cents on the dollar rather than 37 cents. While this is a modest reduction, it does reduce the marginal incentive for high-income donors to give through the itemized deduction path.
Higher SALT Cap May Shift Itemization Math
The SALT deduction cap increased from $10,000 to $40,000 starting in 2025 (with a phaseout beginning at $500,000 of income). For taxpayers in high-tax states like California, this change may push total itemized deductions above the standard deduction again, making charitable contributions incrementally deductible. This is worth modeling on a case-by-case basis.
60% AGI Limit for Cash Gifts Made Permanent
The OBBBA permanently set the limit for deducting cash gifts to public charities at 60% of AGI, up from the historical 50% cap. For donors making large cash contributions in a single year, this provides meaningful additional capacity.
Strategies That Still Deliver Tax-Efficient Charitable Impact
The following table summarizes the primary charitable giving strategies available in 2026, along with their tax treatment and the situations where each is most effective.
| Strategy | Tax Treatment | Best For | Key Considerations |
|---|---|---|---|
| Donor-Advised Fund (DAF) | Itemized deduction in the year of contribution; subject to 0.5% AGI floor | Bunching multiple years of giving; donating appreciated assets | Grants distributed over time; does not qualify for the new non-itemizer deduction |
| Qualified Charitable Distribution (QCD) | Excluded from AGI entirely; no itemization required | IRA owners age 70½+; satisfying RMDs tax-efficiently | 2026 limit: $111,000/person; cannot go to DAFs or private foundations |
| Appreciated Securities (Direct Gift) | No capital gains tax; fair market value deduction (up to 30% AGI) | Stocks or funds with large unrealized gains | Must be held >1 year; does not qualify for non-itemizer deduction |
| Charitable Remainder Trust (CRT) | Partial deduction at funding; income stream to donor | Large asset transfers; donors wanting income + charitable goals | Irrevocable; requires legal setup; remainder goes to charity |
| Cash Gifts (Non-Itemizer) | New above-the-line deduction: $1,000 single / $2,000 joint | Smaller cash gifts when not itemizing | Must go directly to public charities; does not apply to DAFs |
| Bunching Strategy | Alternate between itemizing (high-gift year) and standard deduction | Households near the itemization threshold | Often paired with a DAF to maintain consistent giving to charities |
Donor-Advised Funds: The Bunching Engine
A donor-advised fund is a charitable giving account sponsored by a public charity. You make an irrevocable contribution to the DAF — cash, securities, or other assets — and receive the charitable deduction in the year of the contribution. The funds are then invested and can grow tax-free. Over time, you recommend grants from the account to qualified charities of your choosing.
The power of a DAF lies in its ability to separate the timing of the tax deduction from the timing of the charitable impact. This makes it the natural companion to a bunching strategy: in a high-contribution year, you make a large gift to the DAF, itemize your deductions, and take the standard deduction in subsequent years while continuing to distribute grants from the DAF to the charities you support.
For example, consider a married couple that normally gives $12,000 per year to charity. Over three years, that’s $36,000 in total giving — but none of it is deductible if they take the standard deduction each year. Instead, they could contribute $36,000 to a DAF in a single year, itemize that year (assuming their total itemized deductions exceed $32,200), and take the standard deduction in the other two years. The DAF distributes grants to their chosen charities on whatever schedule they prefer. The total giving is identical, but the tax outcome is significantly better.
DAFs are also an excellent vehicle for donating appreciated securities. Contributing stock that has grown substantially in value allows the donor to avoid capital gains tax on the appreciation and claim a fair-market-value deduction (up to 30% of AGI for non-cash assets). This is often more tax-efficient than selling the stock, paying the tax, and donating the after-tax proceeds.
Qualified Charitable Distributions: The Retiree’s Best Tool
For IRA owners age 70½ or older, the qualified charitable distribution remains one of the most powerful charitable giving tools in the tax code — and it is entirely unaffected by the 2026 changes to itemized deductions.
A QCD is a direct transfer from your IRA to a qualifying charity. The distribution is excluded from your adjusted gross income, which means it doesn’t increase your taxable income, doesn’t affect your Medicare premiums (IRMAA), doesn’t increase the taxable portion of your Social Security benefits, and doesn’t require you to itemize. For taxpayers age 73 or older, a QCD can also satisfy all or part of your required minimum distribution.
The 2026 QCD limit is $111,000 per individual ($222,000 for a married couple where both spouses have their own IRAs). There is also a one-time election to direct up to $55,000 to a split-interest entity such as a charitable remainder trust or charitable gift annuity.
One critical limitation: QCDs cannot be directed to donor-advised funds or private foundations. They must go directly to an operating public charity. For clients who use both a DAF and QCDs, we typically recommend using the QCD for ongoing, predictable giving (annual gifts to a church, alma mater, or community organization) and the DAF for larger, strategic gifts that benefit from bunching and appreciated asset contributions.
Donating Appreciated Securities
Donating long-term appreciated securities directly to a charity or DAF is one of the most consistently effective charitable strategies, regardless of the broader tax environment. It eliminates capital gains tax on the appreciation and, for itemizers, generates a deduction at the full fair market value of the asset.
This strategy is particularly valuable when combined with portfolio rebalancing. If a position has grown beyond its target allocation, donating the appreciated shares and purchasing replacement shares at the current market price resets the cost basis while supporting charitable goals. The tax savings from avoiding capital gains are available whether or not you itemize.
Putting It Together: A Practical Example
Consider a married couple, both age 72, with $280,000 in AGI. They give approximately $15,000 per year to charity and hold $50,000 in appreciated stock (cost basis: $15,000). Under the standard approach, their $15,000 annual gift produces no tax benefit because they take the standard deduction.
A more structured approach might include making QCDs of $10,000 per year directly from one spouse’s IRA to their regular charities, reducing AGI by $10,000, every other year contributing $40,000 in appreciated stock to a DAF, itemizing that year and taking the standard deduction the next year, and using the DAF to distribute grants to charities on the same schedule they’ve always followed. The result: they avoid capital gains on $35,000 of unrealized appreciation, capture meaningful charitable deductions in the years they itemize, reduce their AGI (which may lower IRMAA and Social Security taxation), and maintain the same level of giving to the same organizations.
Key Takeaways
- Roughly 90% of taxpayers now take the standard deduction, which means routine charitable gifts produce no direct tax benefit for most households.
- The new non-itemizer deduction ($1,000/$2,000) provides a modest benefit for cash gifts to public charities, but does not apply to DAFs.
- Itemizers now face a 0.5% AGI floor on charitable deductions and a 35% cap on the deduction’s value for top-bracket earners.
- Donor-advised funds remain the primary tool for bunching multiple years of giving into a single deductible year.
- Donating appreciated securities to a DAF or charity avoids capital gains tax regardless of whether you itemize.
- QCDs from IRAs ($111,000 per person in 2026) remain the most tax-efficient giving tool for retirees, reducing AGI without requiring itemization.
- QCDs and DAFs serve complementary roles and are often most effective when used together.
- The increased SALT cap ($40,000) may push some taxpayers in high-tax states back into itemizing territory, making charitable deductions incrementally valuable again.
If you’d like to evaluate how these strategies apply to your specific situation, we’re here to walk through the analysis with you.
