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Qualified Charitable Deductions

Charitable Deductions Strategies

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Year-end 2025 is a particularly important time to be intentional with charitable gifts because 2026 will bring new limits that can reduce the value of deductions.

Charitable Contributions for Taxpayers who Itemize Deductions

Itemizers will face new limitations on their charitable deductions in 2026.

  • New 0.5% AGI Floor: Charitable contributions are only deductible to the extent they exceed 0.5% of your Adjusted Gross Income (AGI). For example, a taxpayer with an AGI of $200,000 can only deduct contributions above $1,000 (0.5% of $200,000)
  • Cap on High-Income Deductions: For those in the top marginal tax bracket (currently 37%), the tax benefit of all itemized deductions, including charitable contributions, will be capped at 35%. The charitable deduction is not limited to 35% of AGI, rather the highest marginal tax benefit will be 35%.
  • AGI Limits Remain: The limit for deducting cash gifts to public charities remains at 60% of AGI.

Charitable Contributions for Taxpayers who Take the Standard Deduction

Starting in 2026, taxpayers who take the standard deduction will be able to claim a new separate  charitable deduction. The maximum deduction is $1,000 for single filers and $2,000 for married filing- jointly. The deduction applies only to cash contributions and does not apply to contributions made to donor-advised funds.

Timing Donations With a Donor-Advised Fund

With a donor-advised fund, you make a contribution (or series of contributions) to the fund and recommend how you would like your gifts to be disbursed. Contributions to a donor-advised fund are generally tax deductible in the year they are made. By funding a donor-advised fund in a year you expect to itemize your deductions could provide a tax advantage. If desired, you could then put those dollars to use over several years by supporting your favorite charities through your donor-advised fund. You can itemize in years in which you make the contribution to a donor-advised and take advantage of the high standard deductions in the years in which you don’t contribute.

Timing and “Bunching” Gifts

Consider bunching two or more years of gifts into 2025 so that your charitable giving plus other itemized deductions clearly exceeds the standard deduction. Then take the standard deduction in 2026. If you expect higher income in 2025 than 2026, shifting more giving into 2025 may produce more beneficial deductions by offsetting income taxed at higher brackets

Donating Appreciated Securities

Many donor-advised funds and other public charities accept contributions of publicly traded stock or other securities. A donation of highly appreciated securities held more than one year provides a potential tax deduction for the securities’ fair market value while also avoiding the capital gains tax that would be due if the securities were sold. Note that itemized deductions for contributions of appreciated securities are generally limited to 30% of AGI.

Making Qualified Charitable Distributions After Age 70½

A qualified charitable distribution (QCD), also known as an IRA charitable rollover, allows you to donate to qualified charities directly from your individual retirement account (IRA). While there is no tax deduction allowed for the donated assets, they don’t count as income either. What’s more, a QCD can help satisfy your annual required minimum distribution (RMD).

Even if you haven’t reached your required beginning date for making RMDs, you may make a QCD if you reached at least 70½ years of age. Gifts must be made directly from your traditional or Roth IRA to a public charity. (Contributions to donor-advised funds are not eligible.) Up to $108,000 may be transferred annually per person in 2025, indexed for inflation in future years.

Do these rules apply for my state also?

These rules apply only to federal income taxes. State income tax rules differ from federal and from state to state.

Each individual’s tax situation is different. Please consult with a tax professional at Urbach & Avraham, CPAs to help you analyze the impact on your personal situation.

ABCs of 2022 RMDs

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Perplexed? Need to take an RMD in 2022? 

Over age 72? – The age for withdrawing from retirement accounts was increased in 2020 from 70.5 to 72. Your first RMD (required minimum distribution) must be taken by April 1 of the year following the year in which you turn 72. After that, your RMDs must be taken by Dec. 31 of each year. However, if you became 72 in 2022, you may want to withdraw the first RMD in 2022. This will avoid having two RMDs in 2023 and bunching income into higher tax brackets. 

Beneficiary of an IRA account?- An individual non-spouse beneficiary must begin taking RMDs on the basis of his/her own life expectancy by Dec.31 of the year after the owner’s death. If the original account owner passed away in 2022 prior to taking this year’s RMD, it still must be withdrawn. The responsibility for taking the year-of-death RMD falls to the beneficiary.

Although the RMDs are calculated based on the beneficiary’s life expectancy, if the original account owner died after Jan. 1, 2020, you need to fully distribute the account within ten years from the owner’s date of death. In year ten, the balance of the account must be distributed. 

If an estate is the beneficiary of an IRA, and the account owner reached age 72, the distributions would be based on the remaining single life expectancy of the IRA owner. If the original account owner passed away in 2022 prior to taking this year’s RMD, the estate must withdraw it by the end of the year. If the owner was younger than 72, the assets must be completely distributed within five years of the owner’s passing, but no annual RMD is required. 

Want to save taxes on the RMD? – Use a Qualified Charitable Distribution (QCD) in 2022 For IRA owners with charitable intentions, there is a huge tax benefit using a QCD. The owner contributes all or part of his RMD to charity. The portion contributed to charity will not be taxed. QCDs can be made as early as age 70.5, even though minimum distributions are not required until age 72. A QCD may only be made by an original account owner, not by a beneficiary. 

What happens if I don’t take the RMD in 2022? If an account owner fails to withdraw a RMD, the amount not withdrawn is taxed at 50%. 

Still perplexed? Everyone’s situation is different. Please consult with a tax advisor at Urbach & Avraham, CPAs, to analyze the impact on your personal situation.