Practical Cents #2: Charitable Giving Strategy: The 2026 Tax Law Changes You Need to Know

Hello everyone, and thank you for joining me. We've officially reached the holiday season, a season of traditions, memories, and giving. And this season, giving just became a lot more important due to some key changes in the recently passed tax law updates. So you'll want to key in on this if you plan to do any charitable giving before year end.

First, let's start with the itemizers, those taxpayers who tally up their donations alongside their other deductions like mortgage interest and property taxes. Beginning in 2026, taxpayers who itemize deductions must exceed a floor of half a percent of their adjusted gross income before the charitable gifts they make can start counting toward their deduction. So what does that mean? It means that completing your gift in 2025 just got a lot more important. For example, a married couple with $500,000 of AGI makes a $10,000 charitable contribution. They do not get credit for the first $2,500, half a percent of $500,000, and would only have a deductible contribution of $7,500.

Now, for the taxpayers who take the standard deduction, the one you get just for being a taxpayer, you also have some key changes to consider regarding the timing of your gift, but in the other direction. Beginning in 2026, taxpayers who take the standard deduction will now be able to deduct up to $1,000 for single filers or $2,000 for married filing jointly couples in charitable contributions. There are a couple of important asterisks to this update. Gifts must be made in cash; for example, securities or personal property do not count. Contributions to a donor-advised fund also do not count.

So what does all this mean? For starters, over the next few weeks, consider not only what you give, but how you give and when you give. Gifts of appreciated stock typically provide a greater tax benefit to you, the donor, than gifts of cash. This is because you're not only getting the deduction for the value of the stock, but you're also avoiding the realization of capital gains. Contributions to a donor-advised fund will count less once it's 2026, so if this is something that has been on your radar, get it opened and funded immediately. If you give in cash, check, or Venmo and take the standard deduction, you may consider waiting just a few short weeks, because your donations will have greater potential tax benefit in 2026.

Giving is wonderful. It's a selfless act that allows direct support to the missions held dearest. But the one thing we always advise against is giving just to capture a tax benefit. First and foremost, give because you want to give to the cause or causes most important to you. But if giving annually is part of your routine, part of who you are and what you like to do, then by all means do it as tax-efficiently and tax-effectively as possible. And as always, consider your giving within your total financial picture.

Like most aspects of financial planning, the strategies and options most effective for you will be unique to your situation and long-term plan. So before you make any hasty decisions around giving in the coming weeks, let's connect to build out and review your financial plan and incorporate the giving strategies that will be most impactful for you and the causes most dear to you. And remember, friends don't let friends donate securities at a loss. Happy holidays.