Top Tax Strategies for Charitable Giving in 2026

Charitable giving in 2026 comes with new tax rules you need to know. The One Big Beautiful Bill Act (OBBBA), effective this year, changes how deductions work for donations. Key updates include:

• 0.5% AGI Floor: The first 0.5% of your Adjusted Gross Income (AGI) in donations isn’t deductible. For example, if your AGI is $1,000,000, the first $5,000 of donations won’t count.
• Above-the-Line Deduction for Non-Itemizers: Standard deduction filers can now claim up to $1,000 (single) or $2,000 (married) for cash donations to public charities.
• 35% Deduction Cap: For high-income earners in the 37% tax bracket, the deduction benefit is limited to 35%.

To navigate these changes, strategies like bunching donations, donating appreciated assets, and using Qualified Charitable Distributions (QCDs) can help you maximize tax benefits. For business owners or those with high-income years, timing and structuring contributions are critical.

Key tactics include:

• Bunching donations into a single year to bypass the AGI floor.
• Donating appreciated assets to avoid capital gains taxes.
• Using QCDs if you’re over 70½ to reduce taxable income.

These strategies align with broader financial planning goals, especially for those experiencing liquidity events, retirement transitions, or business exits. Proper planning ensures your giving remains impactful while reducing your tax liability.

New Charitable Deduction Rules for 2026: What High Earners Need to Know

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The New Above-the-Line Deduction for Non-Itemizers

One of the simpler provisions in the One Big Beautiful Bill Act (OBBBA) is a permanent tax benefit aimed at the 90% of taxpayers who take the standard deduction ^[1]. Beginning in 2026, these taxpayers will be able to claim a new above-the-line deduction for cash donations to eligible public charities - no need to itemize. Let’s break down how this works, tips for maximizing the deduction, and its potential tax benefits.

How the Above-the-Line Deduction Works

Under the newly established Section 170(p), this deduction is capped at $1,000 for single filers and $2,000 for married couples filing jointly (or $500 for those married filing separately) ^[1]. It only applies to cash contributions, which include payments made via check, credit card, or electronic transfer. Non-cash donations like stock, clothing, or vehicles don’t qualify ^[1].

Eligible donations must go to a qualifying public charity under Section 170(b)(1)(A), such as churches, hospitals, or schools. However, contributions to donor-advised funds, supporting organizations, or most private non-operating foundations are excluded ^[1].

"Congress wanted the deduction to flow to working public charities, not to investment vehicles that delay grants to those charities." - Reed Corporation CPA Firm ^[1]

This deduction is reported on Schedule 1 and directly reduces adjusted gross income (AGI), not just taxable income. That distinction can be significant, as it helps taxpayers stay below thresholds for Roth IRA phase-outs, the 3.8% net investment income tax, and Medicare IRMAA brackets ^[1]. Knowing how this deduction interacts with AGI can make a big difference.

Best Practices for Using This Deduction

To fully benefit from this deduction, make sure to donate at least $1,000 (single filers) or $2,000 (joint filers) in cash directly to an eligible public charity by December 31. This is a "use it or lose it" opportunity - you can’t carry the deduction forward to future years ^[1].

If your charitable giving exceeds these limits, consider splitting your contributions. For example:

• Direct the first $1,000 or $2,000 in cash donations to an eligible public charity to take advantage of the above-the-line deduction.
• Allocate any additional contributions through donor-advised funds or similar vehicles in years when you plan to itemize.

Use the IRS Tax Exempt Organization Search tool to confirm a charity’s eligibility and remember to obtain written acknowledgment for any gift of $250 or more ^[1]. This deduction offers a straightforward way to reduce your tax burden while supporting causes you care about.

Filing Scenario Comparison Table

Here’s a look at how maximizing this deduction could translate into federal tax savings for different filing statuses in 2026, assuming a 22% federal tax bracket:

Savings are based on a 22% federal tax rate. Actual results may vary depending on your marginal tax bracket, and state tax benefits might apply in states that follow federal AGI rules ^[1].

Bunching Charitable Gifts to Clear the AGI Floor

The above-the-line deduction from the previous section is straightforward. But this next strategy requires a bit more planning - and the potential tax savings can be much larger. For founders working with fractional CFO services or individuals with fluctuating income, especially during high-earning years, strategies like bunching donations can significantly improve your tax benefits.

How the 0.5% AGI Floor Works

Starting in 2026, the One Big Beautiful Bill Act (OBBBA) introduces a 0.5% AGI floor for itemized charitable deductions. This means only the portion of your donations that exceeds 0.5% of your adjusted gross income (AGI) qualifies as deductible on Schedule A ^[1].

Here’s how it breaks down:

• If your AGI is $300,000, the first $1,500 of charitable donations won’t count as deductible.
• For an AGI of $500,000, the non-deductible portion rises to $2,500.
• At $1 million, the floor disallows the first $5,000 of donations.

To calculate your specific floor, multiply your projected 2026 AGI by 0.005. That number represents the threshold below which your charitable contributions won’t provide any tax benefit if spread out evenly ^[1].

"The 0.5% number sounds small until you start plugging in real incomes. At $300,000 AGI, you lose the first $1,500. At $1 million AGI, you lose the first $5,000. Every year. Forever." - Reed Corporation CPA Firm ^[1]

What’s more, any amount disallowed by the 0.5% floor is permanently lost. Unlike deductions limited by AGI ceilings - where unused amounts can be carried forward for up to five years - this shortfall can’t be recovered in future tax years ^[1].

How Bunching Gifts Reduces Your Tax Bill

Rather than donating a fixed amount every year (e.g., $20,000 annually), you can bundle your contributions into a single year. For example, instead of giving $20,000 per year over three years, you could donate $60,000 in one year and skip contributions for the next two years. By doing this, you only face the 0.5% floor charge once instead of three times.

This approach is especially effective during high-income years following events like a business sale, stock vesting, or a large bonus. In those years, the value of each deductible dollar increases. By bundling donations in a high-income year, you clear the floor in one go, maximizing your deduction ^[1].

A donor-advised fund (DAF) makes this strategy even more flexible. It allows you to claim the full deduction in the high-income year while distributing the funds to charities over time. This ensures your favorite causes receive consistent support while you optimize your tax benefits.

"Bunching saves $10,000 of floor-disallowed deduction relative to ratable giving [over five years at $500k AGI]. Bunching now yields significantly greater tax benefits." - Reed Corporation CPA Firm ^[1]

Failing to clear the 0.5% floor leaves potential deductions on the table ^[4]. To see how this works in practice, let’s compare steady giving to bunching.

Steady Giving vs. Bunching: A Side-by-Side Comparison

The table below compares the outcomes of steady annual donations versus bunching for a married couple with a $500,000 AGI over three years. Both strategies involve the same total donation amount, but the timing of contributions changes the tax benefits.

Assumes the taxpayer itemizes deductions in all scenarios with a $500,000 AGI, where the 0.5% floor equals $2,500 per year. By bunching, the taxpayer avoids two years of floor deductions, recovering $5,000 in lost tax benefits ^[1].

The key takeaway? Timing your donations strategically can make a big difference in how much of your charitable giving translates into actual tax savings. The same total contributions, when grouped, can yield better results simply by reducing the impact of the AGI floor.

Donating Appreciated Assets to Cut Capital Gains Taxes

Timing your charitable contributions is just one side of the coin. What you choose to donate can also play a big role in maximizing tax savings. By giving appreciated assets directly to a qualified charity or donor-advised fund (DAF), you can sidestep capital gains taxes while claiming a deduction for the asset’s full fair market value (FMV).

How Donating Appreciated Assets Works

When you donate a long-term appreciated asset - something you've held for over a year - directly to a qualified charity or DAF, you avoid paying capital gains tax on the asset's growth. Plus, you can deduct the asset’s full FMV from your taxable income.

Assets that qualify for this strategy include publicly traded stocks, ETFs, mutual funds, certain real estate, and private equity interests. However, there are some limits: the deduction is capped at 30% of your adjusted gross income (AGI), with any leftover deduction carried forward for up to five years. One exception to keep in mind is S-corp stock, which most charities and DAFs can’t accept without triggering tax issues. For those in the top 37% tax bracket, the deduction benefit for appreciated assets will be capped at 35 cents per dollar starting in 2026, and charitable contributions will also be subject to a 0.5% AGI floor ^[9].

When This Strategy Makes Sense

This strategy works best if you own assets with a low cost basis compared to their current value - essentially, assets with a large unrealized gain. For founders, this can be particularly useful during high-income years, such as after a liquidity event, significant stock vesting, or a business sale. These moments often align with high deductible values and large potential capital gains exposure, making direct asset donations a smart move.

Key tip: Always donate the asset in-kind to avoid triggering taxable gains. To ensure the transfer settles within the tax year, initiate broker-to-broker transfers by December 20.

If the asset has lost value, the strategy changes. Sell the asset first to harvest the capital loss, then donate the cash proceeds. This way, you can claim both the loss deduction and the charitable deduction.

"Donating the shares directly skips the sale, so the embedded gain is never realized and the tax is never owed." - Summitward ^[9]

Combining timing strategies like bunching with the donation of appreciated assets can amplify both your philanthropic goals and tax savings. This approach works well alongside other planned giving techniques to optimize financial and charitable outcomes.

Selling Assets vs. Donating Directly: A Tax Comparison

Here’s a snapshot of how the numbers stack up for someone in the 37% tax bracket, assuming a $100,000 stock value with a $20,000 cost basis:

Based on 2026 federal rates and OBBBA deduction caps ^[9].

"The direct asset donation produces roughly $16,000 more in charitable impact and a larger deduction." - Kevin Pickett, Greater Houston Community Foundation ^[8]

State taxes can sweeten the deal even more. In high-tax states like California, where the combined federal and state capital gains tax rate can top 37%, donating appreciated assets directly offers even greater benefits.

Qualified Charitable Distributions for Founders Over 70½

For founders aged 70½ and older who are navigating Required Minimum Distributions (RMDs), Qualified Charitable Distributions (QCDs) offer a tax-smart way to donate directly from an IRA to a qualified public charity. This approach not only simplifies charitable giving but also provides meaningful tax advantages.

How QCDs Work

A QCD allows you to transfer funds directly from your IRA to a qualified public charity without incurring taxes on the amount. To qualify, you must be at least 70½ years old on the date of the transfer, and the funds must be sent directly from your IRA custodian to the charity.

The annual QCD limit for 2026 is $111,000 per person. For married couples where both spouses are eligible, this doubles to $222,000, provided each uses their respective IRAs. Eligible accounts include traditional IRAs, inherited IRAs, and inactive SEP or SIMPLE IRAs. However, QCDs cannot be directed to donor-advised funds, private foundations, or supporting organizations - they must go to operating public charities.

This method not only streamlines tax reporting but can also lead to substantial savings on taxes and premiums, as explained in the next section.

Tax Benefits of Using QCDs

The primary tax benefit of a QCD is that it excludes the distributed amount from your Adjusted Gross Income (AGI). This reduction offers several advantages:

• Medicare Premium Savings: Lowering your AGI can help you avoid higher Medicare Part B and D premium surcharges (IRMAA). For example, a $30,000 QCD could save a married couple between $200 and $400 per month in Medicare premiums by keeping them out of a higher IRMAA bracket ^[12].
• Social Security Taxation: Reducing AGI can also decrease the taxability of Social Security benefits.
• Net Investment Income Tax (NIIT): A lower AGI limits exposure to the 3.8% NIIT.

Additionally, QCDs count dollar-for-dollar toward satisfying your RMD. With the RMD age now set at 73, but QCD eligibility starting at 70½, there’s a window of opportunity to reduce your IRA balance before mandatory distributions begin. To maximize this benefit, consider executing your QCD early in the year - before taking personal IRA withdrawals - since the first dollars distributed from an IRA are applied toward the RMD.

Unlike cash donations, QCDs bypass the 0.5% AGI floor entirely. For taxpayers in the top 37% tax bracket, where the tax benefit of cash donations is effectively capped at 35%, QCDs offer a distinct advantage.

"Because the gift never hits AGI, QCDs can be more valuable than itemized deductions - especially in a world where many donors won't clear the 0.5% floor each year." - Raymond James Charitable ^[4]

QCDs vs. Cash Giving: A Comparison

For the majority of taxpayers who claim the standard deduction, cash donations often provide minimal tax benefits - capped at an above-the-line deduction of $1,000 ($2,000 for married couples filing jointly). In contrast, QCDs can exclude up to $111,000 from income, regardless of whether you itemize deductions.

Here’s how QCDs stack up against traditional cash donations:

It’s worth noting that your IRA custodian will issue a Form 1099-R, which may not automatically indicate the distribution as a QCD. Starting in 2026, a new Code Y is being introduced for QCDs. To ensure proper tax treatment, inform your tax preparer that the distribution is a QCD and report it on Form 1040 Line 4b to avoid unintended taxation ^[11].

Charitable Trusts for High-Net-Worth Founders After an Exit

For founders who have recently experienced a major liquidity event - whether through selling a business, a secondary transaction, or an IPO - charitable trusts offer a way to combine philanthropy with advanced tax and estate planning. Unlike outright gifts, these trusts provide unique advantages. Let’s break down how Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) work and why they can be particularly beneficial for founders after an exit.

CRTs and CLTs: How They Work

A Charitable Remainder Trust (CRT) is an irrevocable trust funded with assets like appreciated stock or real estate. It provides an income stream to you (or another beneficiary) for life or a set number of years. Once that period ends, the remaining assets are donated to a charity. The IRS mandates that the charitable remainder must equal at least 10% of the initial asset value, and annual payouts must range between 5% and 50% of the trust’s value ^[14].

One of the biggest benefits for post-exit founders is capital gains deferral. For example, selling $3 million in low-basis founder stock outright could result in up to 23.8% in federal capital gains taxes right away. However, if you fund a CRT with the same stock, the trust can sell it tax-free, reinvest the full proceeds, and spread the tax liability across your income distributions over time ^[1][7].

"CRTs work best with highly appreciated, low-basis assets (real estate, concentrated stock positions, business interests) where the embedded capital gains could lead to substantial tax costs." - CPA Validated ^[7]

A Charitable Lead Trust (CLT) operates differently. Here, the charity receives the income stream for a defined period, after which the remaining assets transfer to your heirs. This makes CLTs more of an estate and wealth transfer tool rather than a vehicle for generating income. Structuring a CLT to pay its annual income to a Donor-Advised Fund allows you to retain some control over grant distributions while achieving estate tax efficiency ^[13].

Both CRTs and CLTs are irrevocable, meaning that once assets are transferred, they cannot be reclaimed.

Now, let’s look at how upcoming tax changes in 2026 could influence these trusts.

2026 Tax Planning Considerations for Charitable Trusts

The One Big Beautiful Bill Act (OBBBA) introduced new rules that will impact charitable trusts starting in 2026. Two key provisions to note:

1. The 0.5% AGI floor applies to the upfront charitable deduction when funding a CRT. For instance, if your adjusted gross income (AGI) is $5 million in the year of your exit, the first $25,000 of charitable contributions won’t be deductible ^[1][6].
2. A 35% deduction cap limits the tax benefit for those in the 37% tax bracket ^[2][6].

These changes make it advantageous to front-load trust funding into the exit year. By doing so, you can absorb the AGI floor in a single high-income year rather than spreading contributions across multiple years. This strategy aligns with advanced tax planning approaches for managing liquidity events.

"The 0.5% floor scales with AGI, so a $1 million spike-year AGI has a $5,000 floor... front-load all $250,000 of giving into the spike year, you absorb only one $5,000 floor. You save $20,000 of lost deductions." - Reed Corporation CPA Firm ^[1]

A potential workaround is using a non-grantor CLT, where the charitable deduction is taken at the trust level under IRC §642(c). This bypasses the 0.5% AGI floor that applies to individuals, making it a more efficient option for high-income scenarios.

"The non-grantor structure is not subject to the new 0.5% AGI floor applicable to individual taxpayers, which makes it a more efficient vehicle in certain high-income planning scenarios." - Carly Evans, Charitable Strategist, REN ^[13]

It’s also worth noting that the federal estate exemption in 2026 will be $15 million per individual ($30 million for married couples) ^[2][5]. With fewer estates facing estate tax challenges, CLTs are shifting focus from pure tax avoidance to strategic, multi-generational wealth planning ^[15].

CRTs, CLTs, and Outright Gifts: A Comparison Table

Here’s a quick side-by-side comparison of CRTs, CLTs, and outright gifts for founders post-exit:

The best choice depends on your specific priorities. If you need income and want to diversify your holdings while avoiding a large immediate tax hit, a CRT might be the way to go. On the other hand, if your estate exceeds $15 million and your primary goal is wealth transfer with reduced tax costs, a CLT - especially a non-grantor setup - could be the better fit.

Coordinating Charitable Giving With Your Overall Wealth Plan

Aligning Charitable Giving With Exit and Retirement Planning

When it comes to strategies like asset donations and gift bunching, timing is everything - especially in exit planning. To maximize the benefits, charitable assets should be transferred before signing a purchase agreement or letter of intent (LOI). Once those documents are signed, the IRS may classify any subsequent gift as a donation of cash proceeds rather than the underlying asset itself.

"The most powerful options expired when the purchase agreement was signed. Presale planning can redirect millions in tax liability into charitable impact." - Evan Lange, Charitable Planning Specialist ^[16]

Here’s a clear example: Donating $10 million in pre-sale shares from a $50 million gain results in $5.8 million in net federal tax. Compare that to $8.2 million in taxes for an equivalent cash donation made after the sale - a difference of $2.4 million ^[17]. This approach not only reduces tax liability but also integrates seamlessly with broader retirement and estate planning goals.

It’s also essential to align charitable giving with retirement, estate considerations, and the upcoming 2026 tax rules. For instance, a founder over the age of 70½ could use Qualified Charitable Distributions (QCDs) to satisfy Required Minimum Distributions (RMDs) without increasing Adjusted Gross Income (AGI). At the same time, they could fund a donor-advised fund during the exit year to bunch multiple years of giving, clearing the 0.5% AGI floor. These strategies don’t compete - they complement each other.

"Charitable giving is most effective when it is aligned with your overall financial strategy... evaluating charitable opportunities within the broader context of finances including cash flow, tax planning strategies, investments, and estate planning." - Kenneth J. Dean, Winthrop Wealth ^[18]

One often-overlooked but critical step is coordinating your deal team early. M&A attorneys typically focus on closing the deal itself, not on philanthropy. By involving your CPA, wealth advisor, and charitable planning specialist 1–3 years before a projected sale, you can ensure that the charitable structure is built into the plan well before a buyer is identified.

How Phoenix Strategy Group Can Help

The complexity of these strategies highlights the importance of expert financial planning. Charitable decisions require precise projections of AGI, post-exit cash flow, and long-term liquidity.

Phoenix Strategy Group specializes in working with growth-stage founders to create the financial framework needed for confident decision-making. Their Integrated Financial Model and cash flow forecasting tools are designed to complement strategies like bunching, appreciated asset donations, QCDs, and charitable trusts. These tools help founders understand how a major charitable contribution during an exit year will impact their tax position, retirement plans, and estate strategy - before making any irrevocable commitments.

Additionally, their fractional CFO and M&A advisory services ensure that charitable planning isn’t an afterthought. Instead, it’s embedded into the deal structure from the very beginning.

For founders preparing for the 2026 tax changes - featuring a 0.5% AGI floor, a 35% deduction cap, and an elevated standard deduction - a well-constructed financial model can make all the difference. It ensures that your charitable strategy not only looks good on paper but also performs effectively when it’s time to file your taxes.

Key Takeaways for Charitable Tax Planning in 2026

Here’s a quick recap of the top strategies for making your charitable giving more tax-efficient in 2026.

With the introduction of the One Big Beautiful Bill Act, the rules around charitable giving have shifted significantly. Non-itemizers now benefit from a new above-the-line deduction of up to $1,000 (or $2,000 for joint filers). Meanwhile, itemizers must navigate a 0.5% AGI floor. For example, a household with $1 million in AGI would lose the first $5,000 of charitable deductions annually due to this floor ^[1].

Here are some key strategies to consider:

• Bunching donations: Use a Donor-Advised Fund during high-income years to overcome the 0.5% AGI floor.
• Donating appreciated securities: By gifting securities held for over a year, you can avoid capital gains tax (up to 23.8%) and claim a deduction based on their full fair-market value.
• Qualified Charitable Distributions (QCDs): If you’re over 70½, QCDs not only bypass the AGI floor but could also reduce your Medicare premiums.
• Charitable trusts for business exits: For founders planning to sell a business, integrating Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs) into your financial strategy can offer notable tax advantages.

When combined, these methods create a comprehensive approach that aligns with broader wealth and exit planning goals.

"The tax code now rewards more deliberate, structured approaches to giving." - Clete Albitz, CFA, CFP®, Albitz & Miloe ^[10]

A layered approach is essential. Timing donations during high-income years, selecting the right assets to give, and using appropriate giving vehicles can maximize your tax benefits. Don’t forget: for any gift of $250 or more, you’ll need a contemporaneous written acknowledgment ^[1][8].

"As charitable giving strategies become more nuanced, working closely with a CPA or tax advisor can help ensure your philanthropic goals remain aligned with your overall financial and tax planning objectives." - Tim Streeter, CPA ^[3]

To make the most of these strategies, precise modeling of your AGI, liquidity, and tax exposure - especially during exit years - is crucial. By embedding charitable giving into your retirement and exit planning, you can achieve both meaningful philanthropic impact and long-term financial efficiency. Phoenix Strategy Group specializes in helping growth-stage founders integrate these strategies into their broader financial plans.

FAQs

Do I benefit more from itemizing or the new $1,000/$2,000 deduction in 2026?

Your choice between the standard deduction and itemizing depends on how your deductible expenses stack up against the 2026 standard deduction: $16,100 for single filers and $32,200 for married couples filing jointly.

Here’s the key: the $1,000 (single) or $2,000 (married) deduction lowers your adjusted gross income (AGI) and can be claimed in addition to the standard deduction. But if you choose to itemize instead, your charitable contributions must exceed a 0.5% AGI threshold to qualify.

A common strategy? Many people find that bunching donations into a single year - rather than spreading them out - helps maximize their tax savings.

How much should I bunch donations to beat the 0.5% AGI floor?

One way to make the most of your charitable contributions is by bunching donations into a single tax year. Here's why this strategy works: the first 0.5% of your adjusted gross income (AGI) isn't deductible, so spreading out donations annually can result in losing that nondeductible portion each year.

By consolidating several years' worth of planned donations into one year, you only need to meet the 0.5% AGI floor once during that period. This approach allows you to maximize your itemized deductions.

Many donors take advantage of donor-advised funds for this purpose. These funds let you make a lump-sum contribution in one year, then distribute grants to charities over time, giving you flexibility while optimizing your tax benefits.

When should I donate pre-sale shares before a business exit?

To make the most of tax advantages, it's important to donate shares before the sale becomes nearly certain. The donation needs to happen while the outcome of the sale is still unclear, ensuring the charity gains true ownership of the shares. Avoid making donations after significant steps have been taken, such as finalizing material terms, completing due diligence, or scheduling a closing date. Timing is everything - be sure to transfer the shares before signing any binding agreements to steer clear of potential IRS disputes.

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