Charitable Giving Under the New 2026 Rules

The charitable deduction rules changed on January 1, 2026. People who take the standard deduction can now deduct some cash gifts. People who itemize lose a small slice of their deduction, and top earners get less from each itemized dollar.

These rules apply to this year's gifts, so the decisions belong in the fourth quarter. Before December 31, decide how much to give, whether to group several years of gifts into one, and whether to give cash, stock, or IRA money.

A new deduction for non-itemizers

Starting in 2026, if you take the standard deduction, you can also deduct up to $1,000 of cash gifts to qualifying charities, or $2,000 on a joint return. Checks, card charges, and electronic payments count. Clothing, stock, and other property do not.

Gifts to donor-advised funds and supporting organizations do not qualify, and amounts over the limit do not carry forward.

Itemizers face a floor and a cap

If you itemize, your charitable deduction now starts above a floor of 0.5 percent of your adjusted gross income (AGI). With AGI of $400,000, the first $2,000 of gifts produces no deduction. Those dollars do not carry forward unless your gifts also exceed the income limits described below.

The second change hits the 37 percent bracket, which for 2026 starts at $768,700 of taxable income for joint filers and $640,600 for single filers. If your income reaches it, itemized deductions are reduced by 2/37 of the smaller of two amounts: your total itemized deductions, or how far your taxable income plus those deductions exceeds the start of that bracket.

In plain terms, each deduction dollar saves at most 35 cents instead of 37. A couple well into the top bracket with $100,000 of itemized deductions loses about $5,405 of deductions and saves about $35,000 in tax instead of $37,000. The cut applies to all itemized deductions, after the floor and every other limit.

Bunching and donor-advised funds

Bunching means grouping two or more years of gifts into one tax year. You itemize that year and pay the 0.5 percent floor once. In the other years you take the standard deduction, $32,200 for married couples filing jointly in 2026, plus the new deduction for cash gifts.

A donor-advised fund makes this practical. You deduct the contribution when you fund the account, then recommend grants to charities over later years. Fund contributions do not count toward the non-itemizer deduction, so in off years, give directly to the charity to claim it.

Bunching often fits a high-income year, such as a strong S corporation year or a property sale. It is a calculation, not a rule, so we run the numbers both ways.

Give appreciated stock instead of cash

If a stock or fund you have held more than a year has gone up, giving the shares usually beats selling them and giving the cash. You can generally deduct the full market value, and no one pays tax on the gain. California taxes capital gains as ordinary income, so skipping the gain helps on the state return too.

Shares held a year or less are deductible only up to what you paid. For shares that have lost value, selling first lets you claim the loss before giving the cash.

Cash gifts to public charities, including donor-advised funds, are deductible up to 60 percent of AGI, and appreciated stock up to 30 percent. Private foundations have lower limits, and excess amounts carry forward five years. Start stock transfers well before late December.

IRA gifts after age 70½

If you are 70½ or older, a qualified charitable distribution sends money directly from your IRA to a charity. The 2026 limit is $111,000 per person. It can count toward your required minimum distribution, and it stays out of your income entirely, so the floor and the cap do not apply and your AGI stays lower. It cannot go to a donor-advised fund, a supporting organization, or most private foundations.

When your business makes the gift

S corporations and partnerships do not deduct charitable gifts themselves. The gift passes through on your K-1, and you deduct your share on your personal return under the same floor and limits. When an S corporation donates appreciated property, each owner's stock basis drops only by their share of the property's tax basis, not its market value.

C corporations have a new floor. For tax years starting in 2026, they deduct gifts only above 1 percent of taxable income, and the 10 percent ceiling remains. Amounts lost to the floor carry forward only from a year in which gifts also exceed 10 percent.

California kept its own rules

California's tax code follows federal law as of January 1, 2025. It has not adopted the 2025 federal charitable changes. There is no California version of the $1,000 or $2,000 deduction, and no 0.5 percent floor or 35 percent cap.

California also lets you itemize on the state return when you take the federal standard deduction, and its standard deduction is small, under $12,000 for married couples. Many owners itemize for California every year. The state caps cash gifts at 50 percent of federal AGI and trims itemized deductions at higher incomes. A bunching plan that helps your federal return may change little in California, so we look at both.

What to gather before December 31

Keep a bank record or written receipt for every cash gift. For any single gift of $250 or more, get the charity's written acknowledgment before you file, showing the amount and whether you received anything in return. Noncash gifts over $500 go on Form 8283, and most property gifts over $5,000 need a qualified appraisal. Publicly traded stock is the main exception.

For a planning meeting, bring your 2026 gifts made and planned, an income projection, brokerage statements showing what you paid for shares you might give, IRA balances if you are 70½ or older, and any gifts your business made.

Book a planning call

To settle your 2026 giving plan before the year closes, book a time with our team at calendly.com/kirkcole/15-minute-meeting. For other year-end moves, see our year-end checklist.

This article is general information, not tax advice for your situation. Tax rules change, and the right move depends on your facts.