By Sheila Morgan
Certain charitable giving provisions became effective for tax years beginning in 2026. There is a new charitable deduction for certain cash contributions by taxpayers who do not itemize and a new floor for itemized charitable deductions. At the same time, Qualified Charitable Distributions remain an important planning strategy for eligible IRA owners. For individuals and families with substantial investment portfolios in retirement assets, this is especially important.
If I take the standard deduction, can I still deduct my charitable giving?
Beginning in 2026, single taxpayers who do not itemize may claim a separate charitable deduction for qualifying cash contributions of up to $1,000, while married couples filing jointly can claim a $2,000 charitable deduction. The contribution must be made to an eligible charity. This is not a revenue adjustment that reduces AGI (adjusted gross income). Instead, it is a separate deduction that reduces taxable income for taxpayers who do not itemize. Assuming the full deduction is available, and the taxpayer is in the 35% marginal federal income tax bracket, a $1,000 deduction could reduce federal income tax by approximately $350, while a $2,000 deduction could reduce federal income tax by approximately $700. Actual savings depend on the taxpayer’s individual circumstances.
What is a QCD, and can I use this to reduce taxes?
For an IRA owner who has reached age 70½, a QCD (Qualified Charitable Distribution) allows funds to be transferred directly from their IRA to a qualifying charitable organization. Assuming one desires to make charitable donations over $1,000 per charity, for 2026 an eligible taxpayer may exclude up to $111,000 of QCDs from gross income. The key point is that a QCD is considered part of the taxpayer’s Required Minimum Distribution, or RMD, for the year. Unlike an ordinary charitable deduction, the QCD is excluded from gross income rather than claimed as a charitable deduction and the distribution must be made directly from the IRA to an eligible charitable organization. Of course, the eligibility of the intended charity should be confirmed before the distribution is initiated. With the RMD being met from the combination of the QCD and the normal IRA distribution, using the QCD reduces the remaining taxable amount of the IRA distribution.
Why are QCDs especially powerful under the new rules?
Because a QCD is excluded from gross income rather than taken as an itemized charitable deduction, it is not reduced by the new 0.5% AGI floor that applies to itemized charitable contributions. It also is not subject to the new limitation on the tax benefit of itemized deductions applicable to certain higher income taxpayers. Reducing the amount included in gross income may provide additional benefits. Depending on the taxpayer’s circumstances and applicable income thresholds, a lower AGI can potentially reduce the taxable portion of Social Security benefits and may help manage Medicare Income Related Monthly Adjustment Amount, or IRMAA, surcharges. Note the QCD limit applies separately to each taxpayer. Therefore, if both spouses are independently eligible and each has eligible IRA assets, each spouse may potentially make QCDs up to the applicable annual limit of $111,000 for 2026. For a married couple where both spouses qualify, up to $222,000 per year can move to charities without ever appearing in taxable income.
To illustrate assume an individual with must take a $50,000 RMD for the year. If they disburse $20,000 from their IRA directly to a qualified charity as a QCD, that counts towards the $50,000 RMD requirement. Instead of triggering a tax on a $50,000 RMD distribution, their taxable event is reduced to $30,000. This is because the $20,000 QCD is not included in taxable income, while the remaining $30,000 distributed to the IRA owner would be taxable. Although the tax treatment can be more complex in some situations, the concept of making QCD’s benefits both your charities while reducing your taxable income.
Helping You Put It All Together
The right charitable giving strategy depends on your income, tax situation, charitable objectives, retirement accounts, and investment portfolio. As part of the planning process, it can be helpful to project 2026 income, determine whether itemizing is likely to provide a benefit, evaluate whether appreciated securities held in taxable investment accounts may be appropriate for charitable gifts, and coordinate any QCDs with RMD planning. Charitable giving is more than a financial transaction. It can reflect your values, support the organizations and causes that matter most to you, and become part of a legacy that continues for generations. Thoughtful planning can help ensure that your charitable intentions are carried out as efficiently and effectively as possible, and we are here to help you put the right pieces in place before year end.
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