The Tax Benefits of Helping Others

The holiday season often brings a renewed desire to help others. You may want to support families in your community, give back to an organization that helped someone you love, or continue a family tradition of giving. Before considering the tax benefits, think about which organizations you want to support and why. Then establish a giving budget that fits within your financial plan, taking into account your own spending needs and other commitments.

Once you know where you want to give and how much, you can decide how to fund those contributions. The same donation can have a different tax result depending on whether you write a check, transfer investments, or give directly from your IRA. Changes taking effect in 2026 make it especially helpful to understand your options before completing your year-end gifts.

Giving Cash

Writing a check, donating online, or setting up recurring contributions are simple ways to support your favorite organizations. Whether those gifts provide a tax benefit depends on how you file your return and which organizations receive the money.

A charitable deduction reduces your taxable income. Your savings depend on the marginal tax rate that would otherwise apply to that income. For example, if you are in the 22% federal tax bracket, a $1,000 deduction could save you about $220 in federal income taxes, assuming the entire deduction offsets income taxed at that rate.

You May Get a Deduction Even if You Don’t Itemize

Beginning in 2026, eligible taxpayers who do not itemize can deduct qualifying cash contributions of up to $1,000 for single filers or $2,000 for married couples filing jointly, in addition to their standard deduction.

For example, if you and your spouse file jointly and donate $2,500 in qualifying cash gifts during the year, you could deduct $2,000 in addition to your standard deduction. The remaining $500 would not provide an additional federal charitable deduction.

This deduction continues beyond 2026 under current law. It applies to qualifying cash gifts, including checks and electronic payments. Donations of investments or household goods do not qualify for this particular deduction, and neither do contributions to donor-advised funds.

There Is a New Threshold if You Itemize

Itemizing generally makes sense when your allowable itemized deductions exceed your standard deduction. You report deductible charitable contributions on Schedule A along with other eligible expenses.

Beginning in 2026, itemizers generally can deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income, or AGI.

For example, suppose your AGI is $200,000 and you donate $5,000. The first $1,000 equals 0.5% of your AGI, leaving $4,000 potentially deductible, assuming no other limitations apply. The resulting tax savings depend on your marginal tax rate and overall tax situation.

Higher-income donors have another change to consider. Beginning in 2026, a new limitation generally caps the federal tax benefit of itemized deductions at 35% for taxpayers in the 37% bracket. Your tax professional can help you evaluate how this affects your charitable contributions.

If you regularly support the same organizations, consider whether combining several years of planned gifts into one year would help. A larger contribution in one year may allow you to itemize when smaller annual gifts would not. Your advisor and tax professional can help compare the outcomes before you commit.

Giving Investments That Have Increased in Value

You may have another source for charitable gifts in your investment accounts. Donating appreciated shares directly can allow more money to reach the charity than selling those shares, setting aside money for taxes, and donating what remains.

For example, suppose stock you purchased more than a year ago for $4,000 is now worth $10,000. If you sold it and the entire $6,000 gain were taxed at a 15% federal long-term capital gains rate, you would owe $900. That would leave $9,100 to donate after setting aside the tax. This example assumes no additional federal or state taxes apply.

If you instead donate the shares directly to a qualified public charity, the charity receives the full $10,000 value before any transaction costs. Tax-exempt charities generally can sell donated shares without paying capital gains tax, allowing more of that value to support their work.

If you have held the shares for more than one year and itemize your deductions, you may qualify for a deduction based on their fair market value when donating to a qualified public charity, subject to applicable thresholds and limits. Your tax savings depend on the taxes you avoid on the gain and the deduction you can claim.

Even if you take the standard deduction, donating appreciated shares directly can still avoid realizing a taxable capital gain. Arrange the transfer with your advisor and the charity before selling the investment. Donating the proceeds afterward generally does not eliminate a gain you have already realized.

Giving Directly from Your IRA

If you are 70½ or older, you may be able to give directly from your IRA through a qualified charitable distribution, or QCD. The qualifying amount is excluded from federal taxable income, and it can count toward your IRA required minimum distribution, or RMD.

You can use a QCD before RMDs begin. For 2026, the annual QCD exclusion limit is $111,000 per eligible individual.

For example, suppose your IRA RMD is $30,000 and you plan to give $5,000 to charity. You could arrange a $5,000 QCD and withdraw the remaining $25,000 for yourself. Assuming your IRA is entirely pretax and the transfer qualifies, you satisfy the full $30,000 requirement while including only $25,000 in taxable income. Your tax savings depend on the rate that would otherwise apply to the excluded distribution.

You can use this approach whether you itemize or take the standard deduction. Because the qualifying gift is excluded from income, you cannot also claim a charitable deduction for it.

The money must transfer directly from your IRA to an eligible charity. Taking a withdrawal into your bank account and then writing a personal check does not qualify. Coordinate your giving before completing planned distributions, since a QCD cannot retroactively change the tax treatment of a withdrawal you already received. Donor-advised funds cannot receive QCDs.

Using a Donor-Advised Fund for Planned Giving

You may know how much you want to set aside for charity without being ready to decide where every dollar should go. A donor-advised fund can give you time to make those decisions.

You contribute cash or investments to the fund, then recommend grants to eligible charities over time. Any available itemized deduction generally applies in the year you contribute to the fund. Later grants do not create another deduction.

This can be helpful when your income is unusually high or when you want to combine several years of giving. For example, someone who typically donates $5,000 annually might contribute $15,000 to a donor-advised fund in one year, then recommend grants over three years. Whether that produces greater tax savings depends on their income, other deductions, and applicable limits.

The contribution is irrevocable, meaning those assets are permanently committed to charity. The organization sponsoring the fund has legal control of the assets, while you retain the ability to recommend grants. Consider your future spending needs and the fund’s fees before deciding how much to contribute.

Make Sure Your Gift Qualifies

Before making a donation, confirm that the organization is eligible to receive tax-deductible contributions. The IRS’s Tax Exempt Organization Search lets you search by an organization’s legal name or employer identification number. Some eligible organizations, including certain churches, may not appear separately in the results, so an absent listing may require further checking.

Also confirm that the organization qualifies for the giving method you plan to use. An organization that qualifies for deductible contributions may not qualify to receive a QCD or a gift eligible for the non-itemizer deduction. Gifts directly to individuals generally do not qualify for a charitable deduction, even when they help someone in need.

Keep the Records You’ll Need at Tax Time

Once you’ve made your gifts, keep the paperwork together so it’s easy to share with your tax preparer. What you need depends on how you give.

• For cash gifts, save receipts, bank records, or contribution confirmations.
• For each contribution of $250 or more, obtain a written acknowledgment stating the cash amount or describing the donated property. It must indicate whether you received goods or services in return and generally include a description and good-faith estimate of their value if you did. You generally must receive the acknowledgment by the earlier of the date you file your return or the return’s due date, including extensions.
• For noncash gifts, you generally must file Form 8283 if your total noncash charitable deduction exceeds $500. Some property donations also require a qualified appraisal, although publicly traded securities generally do not.
• For QCDs, keep the charity’s acknowledgment and provide your tax preparer with the transfer details along with Form 1099-R. The distribution must be reported on your return, with the qualifying amount excluded from taxable income and identified as a QCD.
• For donor-advised fund contributions, keep the sponsoring organization’s written acknowledgment confirming that it has exclusive legal control over the contributed assets. Share it with your tax preparer, along with any records needed for gifts of investments or other property.

Make Your Giving Part of Your Plan

Once you know which organizations you want to support and how much you plan to give, allow enough time to put those decisions into action. Investment transfers and IRA donations can take time, and financial institutions may set processing deadlines before December 31.

Your financial advisor and tax professional can help you choose which assets to give and coordinate the timing with your broader financial plan. With those decisions made, you can complete your gifts knowing how they support both your charitable goals and your financial needs.