Key Tax Changes to Consider

1. New limits on charitable deductions. Beginning in 2026, itemizers may deduct eligible charitable contributions only to the extent they exceed 0.5% of adjusted gross income (AGI). For taxpayers in the 37% federal bracket, the tax benefit of itemized deductions is capped at 35%. These changes increase the importance of gift timing and amount.

2. A charitable deduction for nonitemizers. Taxpayers who take the standard deduction may deduct up to $1,000 in qualifying cash gifts to eligible charities, or $2,000 for married couples filing jointly. Gifts to donor advised funds, supporting organizations and private foundations do not qualify. This creates an opportunity to discuss giving with clients who do not itemize and to select an appropriate strategy.

3. Increased SALT deduction. The 2026 state and local tax deduction cap has increased to $40,400, subject to income-based limitations. Although the deduction is likely to help wealthier taxpayers in high-tax states the most, particularly if they have a lot to itemize in addition to high state income and property taxes, these changes may also make it worthwhile for more people who used to take the standard deduction to consider itemizing. Advisors should consider how it affects clients’ decisions about itemizing and charitable giving.

Charitable Planning Strategies for Year-End

1. Consider bunching charitable contributions.

For clients who give to charity regularly, bunching several years of planned charitable contributions into a single tax year rather than giving the same amount each year may be beneficial for clients looking to itemize their deductions. A Donor Advised Fund (DAF) can make this strategy practical. Clients contribute several years’ worth of charitable gifts to the fund in one year and recommend grants to their chosen charities over time. In subsequent years, clients can utilize the standard deduction while continuing their charitable giving using the DAF.

With the new 0.5% AGI floor for itemized charitable deductions in 2026, advisors should compare the potential tax benefits of annual giving versus bunching. The right approach will depend on the client’s income, deductions, charitable goals and overall tax situation.

The Associated offers a DAF program to help clients organize their giving, involve family members and support meaningful causes. We welcome opportunities to work with advisors and clients to determine whether this approach fits.

YEAR-END DAF INCENTIVES:

For every new DAF established with The Associated of $10,000 or more by December 31, 2026, The Associated will match up to $1,000 in grants to a Jewish charity of your choice, subject to certain limitations.

Existing fundholders who refer someone who opens a DAF with The Associated by December 31, 2026 will receive $250 in their funds to match qualifying grants; there is no limit on how many referrals one can make!

2. Review appreciated securities.

Clients holding appreciated stocks or other eligible assets may support charity while avoiding the capital gains tax that generally results from selling first. Donating securities held more than one year may also provide a fair-market-value deduction, subject to applicable limits. Year-end is a good time to identify suitable assets based on market performance and portfolio circumstances.

Advisors should coordinate early with clients and recipient organizations, so transfers are completed by December 31. Learn more about transferring stock to The Associated.

3. Evaluate qualified charitable distributions from IRAs.

For clients age 70½ or older, Qualified Charitable Distributions (QCDs) remain a valuable giving strategy. In 2026, eligible individuals can transfer up to $111,000 directly from an IRA to qualifying charities. A properly executed QCD is generally excluded from taxable income and can count toward all or part of an individual’s Required Minimum Distribution (RMD).

QCDs can be especially valuable for clients taking the standard deduction because the tax benefit does not depend on itemizing. The IRA must transfer funds directly to an eligible charity, and the excluded amount cannot also be claimed as an itemized charitable deduction.

Eligible clients may also make a one-time QCD of up to $55,000 in 2026 to fund qualifying Charitable Gift Annuities, Charitable Remainder Unitrusts and Charitable Remainder Annuity Trusts, subject to specific requirements. Advisors should review whether these arrangements fit the client’s income needs, charitable goals and estate plan.

4. Put existing donor advised fund balances to work.

Clients with an existing DAF may have funds available to distribute. Year-end is an opportunity to revisit priorities, identify organizations to support and recommend grants before December 31.

DAF contributions and grants are separate transactions for tax purposes. A client generally receives a deduction, subject to applicable rules, when contributing to the fund, but not when recommending grants. DAF contributions also do not qualify for the new nonitemizer deduction.

5. Review charitable beneficiary designations and estate plans.

Year-end planning should extend beyond current income taxes. Clients may wish to review beneficiary designations on retirement accounts and life insurance policies, as well as provisions in wills and trusts, to ensure their plans reflect current charitable priorities.

A beneficiary designation or bequest can provide a straightforward way to make a future gift. Advisors can help clients evaluate the financial, tax and estate-planning implications and coordinate with the client’s advisory team.

A Collaborative Approach to Charitable Planning

Effective charitable planning considers a client’s complete financial picture, including income, assets, tax exposure, retirement needs and estate plans. But it is about more than tax savings. Charitable giving can help clients pass along their values, involve the next generation in philanthropy and make a lasting impact on the causes and community they care about.

The Associated’s planned giving professionals welcome the opportunity to collaborate with you and your clients to explore strategies that align financial goals with philanthropic priorities and create opportunities to make a difference today and in the future.

As you complete year-end reviews, consider how charitable planning can help clients do more with their resources while reflecting what matters most to them.