FPFA Monthly Insights - Charitable Gifting Approaches (January 2026)
As I look back on a busy 2025, I note that there was an especially large amount of charitable gifting at year-end. Several factors were at play ranging from altruism to the more practical desire to squeeze in giving on the heels of a strong stock market and before the OBBBA’s 2026 changes that may affect charitable giving deductions.
These changes to deductions are summarized below. Ask your CPA or tax advisor for more information as Front Porch Financial is not a tax advisor.
For Taxpayers Who Take the Standard Deduction. Beginning in the 2026 tax year, a permanent charitable contribution deduction limit of $1,000 for single filers and $2,000 for married couples filing jointly will apply to certain contributions.
This new deduction is available to single and MFJ taxpayers who do not itemize using Schedule A. Eligible taxpayers may claim the deduction regardless of income level or other deductions.
For Taxpayers Who Itemize Deductions. Beginning in the 2026 tax year, the charitable contribution deduction for individual taxpayers who itemize is only available if the aggregate contributions exceed 0.5% of their adjusted gross income (AGI), which is computed without regard for the charitable deduction. Also, in 2026 those in the topic bracket (37% federal) can only deduct their charitable contributions at 35%.
Please know that taxpayers aged 70.5 and older with traditional IRAs may make qualified charitable distributions (QCDs) which are not subject to the new 0.5% floor.
So, how was the gifting done in 2025?
Donating Appreciated Securities. The most common method of gifting to charity was by transferring highly appreciated (aka ‘low-cost basis’) securities to a charity of choice. Effectively, you are avoiding capital gains on the security by gifting it, the receiving charity simply sells the security for its proceeds, and you get to deduct the fair market value of the donated securities up to 30% of AGI (if itemizing) ----- the new rules of course now affect that with the 0.5% hurdle and the 35% cap referenced above.
Incidentally, if you had securities with a capital loss you would consider selling the security yourself, taking the loss, and donating the cash. Cash deductions are deductible up to 60% of AGI for most taxpayers (if itemizing) – also with the new OBBBA stipulations.
If you want to do this, contact us --- hopefully not late in the year --- and we will coordinate with you and your charities to get their information for Schwab to send the securities. We will prepare paperwork for you to sign electronically or with wet ink.
Donor Advised Fund (DAF). DAF giving is powerful if you have highly appreciated assets just like the scenario when gifting directly to a charity. DAFs are commonly used when someone has a high-income year or wishes to bunch multi-year gifts in one year. This is because you get the deduction when you contribute to the DAF, but not when you make grants from the DAF to charities.
Some clients like DAFs even when not in a high-income year because they like having their charitably inclined money earmarked and invested. Also, some like treating the DAF akin to their own mini charitable foundation.
We use Schwab for our DAF’s. Generally, we choose investments from a selection of basic asset classes or allocations funds.
Note – the OBBBA changes also affect DAF contribution deductibility starting in 2026.
Qualified Charitable Distributions (QCD). If you are over age 70.5, you can send up to $115,000 per year (in 2026) directly from your IRA to a charity. This can count towards your RMD, but timing of the distribution is important.
QCD’s are sensible for retirees wishing to reduce their taxable income because the QCD is taken off your taxable income. However, you do not get the deduction for the charitable giving. You only get the lowered income, which can be important to anyone but especially to retirees who don’t itemize and/or are trying to reduce their Medicare IRMAA exposure.
Like the direct gifting of securities to charities, clients identify the charities of choice and we prepare paperwork for them to sign off on the distribution. Some clients like to have checks from Schwab to write a check to the charity but that is less common.
As stated, the OBBBA may lessen the appeal of gifting from a tax perspective ---- most people give about 2% of their AGI so the 0.5% hurdle if itemizing eliminates 25% of their deductible giving --- but, a thoughtful and tax cognizant approach to a charitable inclination you may possess regardless of everchanging tax rules remains an important part of your overall wealth management efforts.
Also, this newsletter focuses on simple solutions for publicly traded securities and brokerage accounts. While outside of Front Porch's lane, we are happy to participate in discussions about more complex gifting strategies with your legal and tax professionals.
Please let us know if you want gifting to be a discussion point in 2026!
Best,
Geoff
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Front Porch Financial Advisory distributes its ‘FPFA Monthly Insight’ to clients and participants in the retirement plans it advises with the intent of providing information that may be relevant to a broad audience. The content is gathered from various industry resources such as money managers, licensing and education providers, and professionals in fields tangent to wealth management. This material is provided for educational purposes only and does not constitute investment, legal, tax, business, or any other advice. This information is not a substitute for such professional advice or services. Before making any decision or taking any action that may affect you or your personal finances, you should consult a qualified professional advisor.
