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I’ve found that many people don’t fully understand how the tax treatment of charitable donations works. I will explain it and provide helpful tips to help you minimize your taxes.
In 2026, a new tax regulation takes effect related to charity:
If you claim the standard deduction (80-90% of people do), you can now deduct up to $1,000 ($2,000 for married filing jointly) in qualified cash donations to eligible charities and receive an “above-the-line” deduction.
You can only donate cash, checks, or electronic payments (no stocks) to recognized charities like various non-profits, churches, and so on. If you donate $250 or more, maintain documentation (bank statements, receipts, etc)
This is a great change because previously, you had to itemize your deductions in order to receive any tax benefits from donating to charity. Not anymore.
This is why in 2026 you MUST track your donations, even if you donate just $100 in a single year (whereas previously you might not have tracked it, as it didn’t matter).
If you donate more, you may or may not get any tax benefits from it depending on whether you itemize (Schedule A) or not.
Here are a few additional tips related to charitable deductions and taxes:
Use a Donor Advised Fund (DAF)
Say you donate $2,000 every year (if you are single) and your itemized deductions (like state taxes, real estate taxes, etc.) total $12,000. Because the standard deduction is $16,100 for 2026 (which is higher than your itemized deductions of $12,000 + $2,000, or $14,000), you will not get any tax benefits for the additional $1,000 contribution. This is because only $1,000 will be deductible with the new law. Since you donate $2,000, you never receive the tax benefit of donating that extra $1,000.
This is where a DAF can come into play. A DAF is a charitable investment account set up solely for the purpose of donating to charities. You contribute money into the DAF and then make donations to charities from it. You can also invest the money within the DAF.
Why is this beneficial?
Well, let’s say you donate $2,000/year. With a DAF, you could donate $10,000 all at once, receive an immediate tax deduction, and then spread those donations out over the next 5 years.
In our example, this would increase your itemized deductions to $22,000 (assuming you have sufficient adjusted gross income), allowing you to claim a tax deduction.
While this strategy requires having the means to make a larger donation upfront, it can be a great way to lower your overall tax impact.
Another strategy could be to lower your donation to $1,000 (to get the full benefit), and perhaps make a larger contribution once you do eventually itemize. This can help you shift the timing and realize more tax benefits.
Appreciated shares instead of cash
Let’s say you plan to donate $500 in cash to charity. You also have 2 shares of Apple worth $500 in your taxable brokerage account, with $400 in gains ($100 cost basis).
Instead of donating the $500 in cash, you can donate your 2 shares of Apple, valued at $500. Then, you use the $500 you would have donated in cash to repurchase Apple shares. You receive a fair market value (FMV) deduction for your donated shares, so $500 (assuming you have sufficient adjusted gross income).
What this accomplishes is that you increase the cost basis of your new investment by $400 (the original basis was $100, and now it’s $500). This strategy allows you to pay less in taxes when you eventually sell those new shares. Of course, you will only get the tax deduction if you itemize, otherwise just donate cash instead (if you take the standard to get $500 deduction).
Note that you cannot donate shares and get the maximum $1,000 (or $2,000 if married) new deduction. Only cash (including electronic transfers) applies.
Traditional IRA + QCD
If you are age 70½ or older, you can make a Qualified Charitable Distribution (QCD) from an IRA.
A QCD can be made for up to $111,000 per year (2026), and this limit applies separately for each spouse. The QCD can satisfy your Required Minimum Distribution (RMD) from IRAs, and the best part is that you don’t have to itemize deductions to receive the benefit.
Since the money is transferred directly from your IRA to the charity, it is excluded from your taxable income, allowing you to still claim the standard deduction.
How to run the numbers
A good way to run the numbers is:
1. Compare the standard deduction ($16,100 single, $32,200 married) in 2026
2. to your projected itemized deductions (real estate taxes + state taxes + mortgage interest, or anything from Schedule A)
If your itemized deductions are already higher than the standard, your charitable deduction will likely be deductible. If your standard deduction is higher, analyze how much you may donate in a year, and compare the numbers.
I hope you learned something new. Any feedback? You can always reply.
Enjoy your weekend.
MC, CPA
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