Beginning January 1, 2026, the One Big Beautiful Bill Act (OBBBA) changes how charitable deductions work. These updates especially affect donor-advised funds (DAFs), non-itemizers, and high-income taxpayers. Planning ahead can help you maximize your giving impact and your tax savings.
Below are five charitable giving strategies—updated for OBBBA—that can help you give more effectively and tax-efficiently.
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Set Up or Pre-Fund a Donor-Advised Fund (DAF)*
A donor-advised fund allows you to contribute assets and recommend grants to charities over time. However, OBBBA significantly changes how DAF deductions work starting in 2026.
How OBBBA Changes DAF Tax Rules
- Non-itemizers: Cash gifts to DAFs do not qualify for the new above-the-line deduction ($1,000 single / $2,000 joint).
- Itemizers: Only the portion of DAF contributions above 0.5% of your AGI will be deductible.
- High-income donors: The tax benefit of charitable deductions—including DAF gifts—is capped at 35% (currently 37%).
2025 Planning Opportunity
To secure today’s more favorable DAF rules, consider pre-funding your DAF before January 1, 2026.
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Donate Appreciated Shares Instead of Cash
Donating long-term appreciated stock can provide significantly better tax advantages than cash gifts.
Benefits of Donating Appreciated Shares
- Avoid paying capital gains tax on appreciated value
- Deduct the full fair-market value (subject to deduction limits)
Example:
Donate stock now worth $60,000 purchased for $20,000:
- Avoid capital gains on $40,000
- Deduct the full $60,000 value
OBBBA Consideration
- Direct gifts to public charities remain fully deductible.
- Gifts of appreciated shares to DAFs may be limited by the new 0.5% AGI floor and 35% cap.
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Use a Qualified Charitable Distribution (QCD) to Donate Your RMD
If you’re age 70½ or older, a Qualified Charitable Distribution (QCD) allows you to donate up to $100,000 directly from your IRA to a qualified charity.
Why QCDs Are Extremely Valuable Under OBBBA
QCDs are not affected by:
- The above-the-line deduction rules
- The 0.5% AGI deduction floor
- The 35% cap on high-income taxpayers
This makes QCDs one of the most tax-efficient charitable giving strategies after OBBBA takes effect.
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Use the Annual Gift-Tax Exclusion
If you want to transfer wealth efficiently while reducing your future taxable estate, the annual gift-tax exclusion is one of the simplest and most effective tools available.
In 2026, you can give up to $19,000 per recipient — without triggering gift tax and without using any of your lifetime estate and gift-tax exemption. This exclusion applies per individual, not per household, meaning you can give $19,000 to as many people as you choose.
This strategy is unchanged by OBBBA and remains a simple way to support loved ones while reducing your taxable estate.
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Contribute to a 529 Plan for Tax-Advantaged Education Savings*
A 529 plan is one of the most flexible and tax-efficient ways to save for education. Contributions grow tax-free, and withdrawals remain tax-free when used for qualified education expenses, including:
- College and university tuition, fees, books, and supplies
- K–12 tuition (up to allowable limits)
- Certified apprenticeship programs
- Student loan repayment (within federal limits)
Student Loan Repayment Limits
529 plan funds can be used to repay up to $10,000 in qualified student loans per beneficiary, plus an additional $10,000 for each of the beneficiary’s siblings.
This allows families to use 529 savings not only for future education, but also to strategically pay down existing student debt.
State Tax Benefits
While 529 contributions are not deductible at the federal level, more than 30 states (plus Washington, D.C.) offer state income-tax deductions or credits for contributions to their own 529 plans.
This can provide meaningful, recurring tax savings for families who contribute annually.
OBBBA Impact
The One Big Beautiful Bill Act (OBBBA) does not change the rules governing 529 plans. Their tax-free growth and state-level benefits remain intact, making 529 plans a reliable planning tool even after the new law takes effect in 2026.
Act Before 2026: Important OBBBA Timing Strategies
Because major deduction rules change in 2026, consider:
- Pre-funding your DAF in 2025
- Bunching multiple years of giving into 2025 to avoid the 0.5% AGI floor
- Making large charitable gifts before the 35% deduction cap applies
- Using QCDs, which remain fully exempt from OBBBA limitations
These timing strategies may help you preserve tax advantages that are disappearing in 2026.
Final Thoughts
Charitable giving remains a powerful way to support the causes that matter most to you. With the One Big Beautiful Bill Act reshaping the charitable landscape in 2026, proactive planning is essential.
By leveraging strategies such as appreciated stock gifts, QCDs, DAF pre-funding, and tax-smart wealth transfers, you can continue to make a meaningful difference while maximizing your tax benefits.
Consult your tax advisor or financial advisor for personalized advice, as individual circumstances may vary.
*Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.
**Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state’s 529 Plan.