Giving to Charity Tax-Efficiently

People who give to charity often get less tax benefit than they could, not because they give too little but because of what they give and when. Writing a check from a checking account is the least tax-efficient way most people can give. This chapter explains how charitable deductions work in 2026, including the new rules for people who do not itemize, and the three tools that make the same gift cost less: giving appreciated investments, bunching through a donor-advised fund, and giving straight from an IRA after age 70½.

How gifts are deducted in 2026

Only gifts to qualified organizations count: public charities, religious organizations, and private foundations, among others. Gifts to individuals, political campaigns and most crowdfunding pages for a person do not. The IRS Tax Exempt Organization Search shows whether an organization qualifies. If you receive something in return, such as a dinner or event tickets, only the amount above the value of what you received is a gift.

From 2026 there are two routes to a deduction.

If you itemize. Gifts go on Schedule A. Three limits apply. First, only the part of your total gifts above 0.5% of adjusted gross income is deductible, a new floor from 2026. Second, cash gifts to public charities are limited to 60% of income, and gifts of appreciated property to 30%; anything over the limit carries forward for up to five years. Third, for people in the top 37% bracket, the 2025 law reduces the benefit of itemized deductions so that each dollar saves at most about 35 cents.

If you take the standard deduction. From 2026 you can still deduct cash gifts to public charities of up to $1,000, or $2,000 on a joint return. Gifts to donor-advised funds and to most private foundations do not count for this deduction, and gifts of property do not either.

A single filer with $70,000 of wages owes $6,570. Claiming the full $1,000 non-itemizer deduction brings the tax to $6,350: a saving at the 22.0% marginal rate. That is modest, but before 2026 the same gift saved nothing at all for someone who did not itemize.

Give investments, not cash

If you hold shares, funds or other investments that have risen in value and that you have owned for more than one year, giving them directly to a charity is usually better than selling them and giving the cash.

When you give the investment itself, two things happen. You can deduct its full market value on the day of the gift, if you itemize. And neither you nor the charity pays capital gains tax on the growth, because the charity is tax-exempt. If you sold first, you would owe tax on the gain at 0%, 15% or 20% depending on your income, plus the 3.8% net investment income tax at higher incomes, and you would have less to give.

A common pattern is to give the shares with the largest gains and then, if you still want that investment, buy it again with the cash you would have given. The new shares start with a higher cost, which lowers tax when you eventually sell them. The wash-sale rule does not apply here, because it only restricts losses.

The opposite applies to investments that have fallen. Sell them, use the capital loss on your return, and give the cash. Giving a loser to charity throws the loss away.

Investments held one year or less are deductible only at what you paid for them, and gifts of property to private foundations are generally limited to cost as well. Brokers can transfer shares to most large charities in a few days; give yourself time before December 31.

Bunching with a donor-advised fund

A donor-advised fund is an account at a sponsoring charity, often run by a large brokerage or community foundation. You put money or investments in, take the deduction that year, and then recommend grants to charities whenever you like, in that year or later ones. The money in the fund can be invested and grow without tax.

Its main tax use is bunching, which chapter 1 introduced. A household that gives a similar amount every year and itemizes near the standard deduction can put several years of giving into the fund in one year, itemize that year, and take the standard deduction in the years between, while the charities keep receiving grants on the usual schedule. The 2026 rules make this more useful than before: the 0.5% floor applies once in the bunching year instead of every year.

The trade-offs are real. A contribution is irrevocable: the money can only go to charity. Sponsors charge administrative fees and the investments have their own costs. Grants cannot pay for something that benefits you, such as tickets, a pledge you personally owe, or a membership with privileges. And as noted above, fund contributions do not qualify for the non-itemizer deduction.

Giving from an IRA after 70½: the qualified charitable distribution

Once you are 70½, you can send money directly from a traditional IRA to a charity as a qualified charitable distribution. The amount never enters your income. Once your required minimum distributions have started (age 73 for people born from 1951 through 1959, 75 for people born in 1960 or later), the gift also counts toward that year's required amount.

This often beats itemizing, for three reasons. It works whether or not you itemize, so a retiree taking the standard deduction still gets the full benefit. It lowers adjusted gross income itself, not just taxable income, and several things key off adjusted gross income: how much of your Social Security is taxed, the income-related surcharge on Medicare premiums, and the senior deduction phase-out. And the 0.5% floor does not apply.

A retired couple with $110,000 of income, including a required IRA withdrawal, owes $8,840 before the extra deductions for age. If they had taken the whole withdrawal and then given part of it to charity by check, the standard deduction would leave them with no deduction for the gift. Sending that part directly from the IRA instead brings their income to $100,000 and the tax to $7,640, and the lower adjusted gross income may also reduce the tax on their Social Security.

The rules are strict. The money must go from the IRA custodian straight to the charity; a withdrawal you deposit and then give does not count. Donor-advised funds and private foundations cannot receive a qualified charitable distribution. The yearly limit per person is indexed to inflation, so check the current figure in IRS Publication 590-B before a large gift. It works from IRAs, not from a 401(k) unless you first roll the money into an IRA. And your Form 1099-R will not mark the distribution as a gift; you or your preparer must report it correctly on the return.

Keep the paperwork that makes the deduction stick

A deduction you cannot document can be disallowed. For any cash gift, keep a bank record or a written receipt from the charity. For any single gift of $250 or more, you need a written acknowledgment from the charity before you file, stating the amount and whether you received anything in return. For property gifts totalling more than $500, file Form 8283. For a single item or group of similar items worth more than $5,000, other than publicly traded securities, you generally need a qualified appraisal.