Giving to Charity Tax-Efficiently

Most people who give to charity get no tax benefit from it at all, because they take the standard deduction and their gifts are never counted. That changed a little in 2026, and the ways to get more from each gift, donating shares instead of cash, grouping gifts into fewer years, using a donor-advised fund, and giving straight from an IRA after 70½, work better than ever under the new rules. This chapter explains how the deduction works in 2026, each of the four techniques, and when each one fits. None of them makes giving free; they make the same gift cost you less, or let the charity receive more.

How the charitable deduction works in 2026

If you itemize. Gifts to qualified charities are part of your itemized deductions, which you claim only when their total beats the standard deduction: $16,100 for a single filer and $32,200 for a married couple filing jointly in 2026. Starting in 2026, only the part of your charitable gifts above 0.5% of your adjusted gross income counts. Cash gifts to public charities are deductible up to 60% of adjusted gross income, gifts of appreciated stock held more than a year up to 30%, and anything over the limit carries forward for five years. For people in the top 37% bracket, the new law also limits the tax value of itemized deductions, so each deducted dollar saves at most 35 cents.

If you take the standard deduction. From 2026, you can deduct cash gifts to public charities of up to $1,000 as a single filer or $2,000 on a joint return, on top of the standard deduction. Gifts to donor-advised funds and private foundations do not qualify for this one.

In both cases, the gift must go to a qualified organisation, and larger single gifts need a written acknowledgment from the charity, received by the time you file; IRS Publication 526 sets out the threshold and the records each kind of gift needs. Gifts to individuals, crowdfunding campaigns for a person, and political groups are not deductible.

Give appreciated shares, not cash

If you have shares in a taxable account that have risen in value and that you have held for more than a year, giving the shares themselves is usually better than selling them and giving the cash.

When you donate the shares directly, you can deduct their full market value if you itemize, and neither you nor the charity pays tax on the gain. If you sold them first, you would owe capital gains tax of 15% or 20% on the gain (plus 3.8% at higher incomes) before giving. Giving the shares avoids that tax entirely, and you can use the cash you would have given to buy the same investment again, now with a higher cost basis.

Two points to watch. Shares held one year or less are deductible only at what you paid, not their market value. And never donate shares worth less than you paid: sell them, take the capital loss (chapter 4), and give the cash.

Bunching: two or three years of gifts in one

Because the standard deduction is large, many households give every year and still get nothing for it. Bunching means grouping several years of gifts into one year, itemizing that year, and taking the standard deduction in the years between.

In a normal year this couple's taxable income is $147,800 and their federal tax is $21,940. In the year they bunch three years of gifts, their itemized deductions exceed the standard deduction by enough to bring taxable income to $117,800 and the tax to $15,340. Every dollar of deductions above the standard amount saves tax at their 22.0% bracket. In the off years they take the standard deduction as usual, plus the non-itemizer deduction for any cash gifts they make directly.

The standard versus itemized deduction calculator shows how close you are to itemizing and what bunching would save.

Donor-advised funds: deduct now, give over time

Bunching has an obvious problem: charities depend on steady gifts, not one large gift every third year. A donor-advised fund solves it. You give cash or shares to the fund, which is run by a public charity sponsor, and take the deduction in that year. The money can be invested and grow tax-free, and you recommend grants to charities whenever you like, at the pace you would have given anyway.

What to weigh:

• The gift is irrevocable. Money in the fund can only go to charity.
• Fees and minimums vary by sponsor; compare the administrative fee and the fund choices.
• Restrictions. Grants cannot pay for benefits to you, such as event tickets or a pledge you personally made, and gifts to the fund do not count toward the 2026 non-itemizer deduction.
• Appreciated shares work well here. Funding the account with long-held shares combines the two earlier techniques.

Giving from an IRA after 70½

A qualified charitable distribution moves money directly from a traditional IRA to a charity. You must be at least 70½ on the day of the transfer. The amount is left out of your income altogether, rather than included and then deducted, and from the age when required minimum distributions begin it counts toward your required withdrawal.

Leaving the money out of income is often worth more than a deduction. It helps people who take the standard deduction, who get no benefit from itemized gifts. And lower adjusted gross income can reduce the share of Social Security that is taxed and keep income below the lines that raise Medicare premiums. The yearly limit per person is indexed for inflation; check the current figure in the IRS's annual retirement-plan notice. The money must go straight from the IRA custodian to the charity (not to a donor-advised fund), and workplace plans such as 401(k)s do not qualify unless rolled into an IRA first.