Year-End Charitable Giving in 2026: Planning Under New Tax Laws
- No Comments
2026 is the first year under new rules established by the One Big Beautiful Act (OBBBA), the federal tax law enacted in 2025. As we approach the holiday season, many families we partner with are thinking about the causes that matter most to them.
Yet year-end charitable giving in 2026 calls for more planning than recent years, because several legislative changes may affect the deductibility of such gifts.
With a strategic plan, your year-end gifts can simultaneously support the organizations you care about while strengthening your family’s long-term plans. The new rules reward thoughtful timing and potentially greater use of tools such as donor-advised funds.
At Sessa & Dorsey, we help families with complex assets give back in ways that align with their values and support their long-term financial plans. Here is how charitable giving has changed in 2026 and how to make the most of your giving this season.
5 Things to Know About Charitable Giving & Taxes in 2026
- New Increase for Federal Estate & Gift Tax Exemptions
New legislation under the OBBBA has permanently raised the federal estate and gift tax exemption to $15 million per individual (and $30 million per married couple). In 2025, it was $13.99 million per individual. The exemption applies to you, not the recipient.
The gift tax rules apply to any type of property transferred for less than full consideration, including if you sell something for less than its full value, such as a house. If you want to support your children and grandchildren and plan to make substantial gifts, you may wish to consult your financial advisor, accountant, or estate attorney first.
In Maryland, where Sessa & Dorsey is based, the Maryland estate tax exemption remains $5 million per individual and $10 million per married couple. Again, this applies to you and not to each recipient. - New “Floor” for Charitable Tax Deductions
As of 2026, taxpayers may only claim an income tax deduction if their qualified contribution exceeds 0.5% of their Adjusted Gross Income (AGI). For example, a couple with an AGI of $400,000 may only deduct charitable contributions over $2,000. Only the amount above the .5% floor is deductible. - New Cap On Certain Itemized Deductions
Beginning in 2026, in addition to other limitations, if your income reaches the top 37% federal tax bracket, the tax benefit of your itemized deductions is capped at 35%. This includes charitable gifts, mortgage interest, and state and local taxes. In other words, each $1,000 you deduct now lowers your federal tax bill by about $350, rather than $370.
What does this mean for your giving? Setting aside the new floor described above, a $100,000 gift that would have saved a top-bracket donor $37,000 in 2025 now saves roughly $35,000. The cap only affects deductions that offset income in the top bracket, so its impact depends on your full financial picture.
For high-income families, timing now matters almost as much as generosity. Giving more in a year when your income is lower, or using strategies outside of itemized deductions (such as a Qualified Charitable Distribution from your IRA, discussed below), may help more of each gift go where you intend. We coordinate with your financial advisor and CPA to find the approach that aligns with your goals and your estate plan. - The 60% Limit for Cash Gifts Is Here to Stay
The Tax Cuts and Jobs Act of 2017 increased the deduction limit for charitable cash contributions to 60%, and it remains in place in 2026. This means cash gifts to charitable organizations are deductible up to 60% of your adjusted gross income. - New Universal Charitable Credit in 2026
Another change this year: taxpayers who do not itemize their charitable deductions may claim a $1,000 deduction per individual ($2,000 for married couples who file jointly) for cash donations to public charities. This universal deduction does not apply to donor-advised funds (DAFs) or private foundations.
New in 2027: Tax Deductions for Scholarship Donations
A new tax credit from the OBBBA will go into effect in 2027. If you donate money to qualified K-12 scholarship-granting organizations, you can claim up to $1,700 in tax credits, regardless of whether you itemize or not. Not all scholarships may qualify, so be sure to keep track of your paperwork for your accountant and estate attorney.
How to Make the Most of Charitable Giving in 2026
Consider a Donor-Advised Fund (DAF)
Suppose you typically donate $5,000 a year to a specific charity and want to fund five years of future gifts. With a donor-advised fund (DAF), you can contribute the total $25,000 to the fund, claim it all for a deduction this year (subject to the various limitations on deductions), and recommend $5,000 in annual grants afterward. Those future grants from the DAF will not give you another deduction; you already took it when you funded the DAF. The new 0.5% tax deduction floor (mentioned above) makes ‘bunching’ even more valuable.
DAFs are accounts held within a sponsoring organization, which holds legal control of the fund. As the donor, you serve as an advisor, recommending how and when to invest and distribute funds to charitable organizations.
Unlike creating a private foundation, you do not need to create a legal entity or establish a board with a DAF. You can open a DAF within a day or two and start recommending grants almost instantly. Initial funding minimums are typically low, ranging from $0 to $25,000. The sponsoring organization is responsible for tax reporting to the IRS, not you. You will receive a written contribution receipt that acknowledges the year the gift was made, allowing you to claim the deduction.
In addition to tax benefits, DAFs make it easy to diversify your charitable giving. A DAF can distribute donations to any public 501(c)(3) organization, including hospitals, universities, libraries, service nonprofits, and places of worship.
If you experience an unexpected windfall, transferring your assets into a DAF can help you avoid a higher-than-average tax bill. Plus, a DAF helps you avoid capital gains tax on appreciated securities you have held for more than a year.
Give From Your IRA with a QCD
Withdrawing from an IRA is typically taxable income. But if you are 70 ½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a nonprofit organization, entirely tax-free. QCDs also count toward Required Minimum Distributions, which begin at age 73. We should note that QCDs cannot go directly to a donor-advised fund; they must be directly sent from an IRA to a charitable organization.
Name a Charity As Your Beneficiary
If you are especially charitably-minded, consider naming a nonprofit organization as a beneficiary of your retirement account. You can name a DAF as a beneficiary of your retirement account, allowing you to support multiple charities simultaneously and remove its value from your taxable estate.
If you want to name several beneficiaries on your retirement accounts, including a charitable organization, we can work with your financial advisor to establish a system that benefits both your favorite organizations and your loved ones.
Let Us Help You Strategize Your Charitable Giving
At Sessa & Dorsey, we help you see a bird’s-eye view of your estate plan to advise you on the best charitable giving tools. You do not have to wade through the laws and regulations alone. Contact our estate and trust attorneys in Baltimore County, Maryland, at (443) 589-5600 or submit our online form.