Giving Smarter: Charitable Planning Under the New Rules

Giving Smarter: Charitable Planning Under the New Rules

Long Islanders are generous people — out of over 3,100 counties in the U.S., Nassau and Suffolk residents rank 11th and 24th, respectively, in terms of the percentage of their discretionary income donated to charities. Long Islanders support a range of cultural, community, religious and healthcare-focused causes. However, the way many of us give, which is writing a check whenever the appeal letter or other request arrives, often leaves financial benefits on the table. That money could have gone to the cause or stayed in your pocket. Strategic charitable giving can create opportunities to enhance the benefits of giving for all parties involved.

This year, the stakes are higher. The tax law passed in 2025 changed how charitable deductions work beginning with 2026 returns. Some of the changes help, some hurt, and nearly all of them reward people who plan their giving strategically rather than improvising it. With year-end approaching, here is what you need to know. What Changed in 2026

If you take the standard deduction when you file your taxes, there is good news. For the first time in several years, you can deduct cash gifts to charity even without itemizing: up to $1,000 for single filers and $2,000 for married couples filing jointly. The gift must be cash (a check or credit card counts) made to an operating charity. However, gifts to donor-advised funds and private foundations don't qualify.

For taxpayers who do itemize, there are also impactful changes. For these taxpayers, charitable deductions now count only to the extent they exceed 0.5% of adjusted gross income. A couple with $200,000 in income gets no deduction for their first $1,000 of gifts. Additionally, for taxpayers in the top 37% bracket, the value of itemized deductions is now capped at 35 cents per dollar.

None of this should change whether you give, but it should change how you give.

Strategy 1: Give From Your IRA, Not Your Checkbook

For readers age 70½ and older, the Qualified Charitable Distribution, or QCD, is one of the most powerful charitable giving tools available, and the recent changes to the tax code have made this option even more impactful.

A QCD lets you send money directly from your traditional IRA to a qualified charity. The distribution never shows up in your taxable income. For tax year 2026, you can give up to $111,000 per person this way, and a married couple can each give that amount from their own IRAs. Once you reach required minimum distribution age, QCDs count toward your RMD and are more or less the only direct means of mitigating the immediate tax impact of these mandatory distributions.

While a regular charitable donation represents a tax deduction that reduces the taxable income of those who itemize (and now only above the 0.5% floor), a QCD reduces your adjusted gross income. Adjusted Gross Income (AGI) is a number that drives a surprising amount of your financial life. It helps determine how much of your Social Security is taxed and whether you pay Medicare's IRMAA surcharges on Part B and Part D premiums. With recent changes that have increased the standard deduction, most retirees now take the standard deduction, and many get little tax benefit from writing checks to charity (aside from the $1,000-$2,000 deduction mentioned above). The same gift made as a QCD can save real money.

A few rules should be followed carefully. The check must go directly from your IRA custodian to the charity; if the money passes through your hands first, it will be considered a taxable distribution. QCDs can't go to donor-advised funds or private foundations. To count for 2026, the distribution must leave your IRA by December 31, so don't wait until the last week of the year, when custodians are busiest.

Strategy 2: Give Appreciated Stock Instead of Cash

For advisors working with clients on charitable giving strategies, there is an old saying: “Friends don’t let friends donate cash.” While cash donations can be appropriate, many long-term and tax-sensitive investors will see far greater benefit from donating appreciated assets from their taxable investment accounts than they will from simply writing a check.

Suppose you bought shares years ago for $5,000 that are now worth $20,000. If you sell them and donate the cash, you owe capital gains tax on $15,000 of profit. If you donate the shares directly, provided you've held them for more than a year, you generally avoid the capital gains tax entirely and can still deduct the full market value if you itemize. The charity receives the same $20,000 either way. You can then use the cash you would have given to rebuy the same investment with a fresh, higher cost basis.

Strategy 3: “Bunch” Your Gifts With a Donor-Advised Fund

The new 0.5% floor applies every year you itemize, which makes steady annual giving less tax-efficient than it used to be. One answer is bunching: concentrating several years of giving into a single tax year so you clear the standard deduction by a wide margin, then taking the standard deduction in the years between. A donor-advised fund makes this practical. You contribute, say, three years' worth of giving in one year and take the deduction then. The money is invested inside the fund, and you recommend grants to your favorite charities on your normal schedule. The charities see no difference; your tax return does. Contributing appreciated stock to the fund combines Strategies 2 and 3.

Strategy 4: Name a Charity on Your Retirement Accounts

For those who plan to leave something to charity at death, which assets you leave matters.

Most children who inherit an IRA must empty it within ten years and pay income tax on every dollar, often during their own peak earning years. A charity, however, pays no income tax on an inherited IRA. So, if your estate plan includes both family and charitable bequests, it's often smarter to leave retirement accounts to charity and leave other assets, such as a brokerage account or real estate that may receive a step-up in basis, to your heirs. Often, this takes nothing more than updating a beneficiary designation form.

This is particularly important in New York, where the state levies an estate tax that has a “cliff”: If your assets are above a certain level, all of your estate is subject to the estate tax. For estates that land just above the state exemption, a well-sized bequest to charity can bring the estate back under the threshold and avoid a disproportionately large state tax bill.

Strategy 5: Consider Giving That Pays You Back

Charitable gift annuities and charitable remainder trusts let you make a significant gift while receiving income for life. These tools suit people with highly appreciated assets or those who want to support a cause without giving up income they may need. The rules allow a one-time QCD of up to $55,000 in 2026 to fund these, but they can be funded with assets in taxable accounts as well.

These structures also offer tremendous flexibility: You can provide a lifetime income stream to yourself or one of your chosen beneficiaries — with the charity receiving the remaining asset upon your passing — or you can do the reverse, sending the charity an annual income stream and having the assets revert to a chosen beneficiary upon your passing. They are more complex and involve permanent commitments, so they deserve a careful conversation with your advisor and attorney. The Bottom Line

At its heart, good philanthropic planning isn't about giving less. It's about making sure more of what you give reaches the causes you care about, and less of it goes to taxes. The above strategies are just scratching the surface. Like most impactful financial planning strategies, charitable gift planning is a highly personalized topic and will depend on your individual financial circumstances, tax situation and goals.

Before you mail your year-end checks, ask yourself three questions: Am I 70½ or older and able to give from my IRA? Do I own appreciated investments I could give instead of cash? And do my beneficiary designations reflect my charitable intentions?

The answers could make your generosity go a good deal further.

Robinson Crothers is Managing Partner at Great South Bay Advisors in Holbrook. This column is for general educational purposes and is not individualized investment, tax or legal advice. Securities and investment advisory services offered through Osaic Wealth, Inc., Member FINRA/SIPC. Great South Bay Advisors and Osaic Wealth, Inc. are not affiliated.