Tax law changes over the past few years, including provisions introduced under The One Big Beautiful Bill, have reshaped how charitable deductions work and created new considerations around timing, gift planning, and long-term wealth transfer. If you're thinking about your charitable goals or planning to make gifts to family members in the coming year, now is a good time to revisit your strategy. 

The eight approaches below can help you maximize impact while remaining tax efficient. Many work even better when combined, and several can help you balance support for both causes you care about and the people you love. OBBBA made those higher standard deduction levels permanent and increased them modestly beginning in 2025, reducing the likelihood that charitable gifts will generate an incremental tax benefit for many annual donors. 

OBBBA also lifted the SALT deduction cap to $40,000 for 2025, subject to income phasedowns for higher earners. Even with this change, many households will still fall near or below the standard deduction threshold. 

1. Bunch Several Years of Future Donations into One Tax Year 

Since the Tax Cuts and Jobs Act (TCJA), higher standard deductions and limits on state and local tax (SALT) deductions have significantly reduced the number of taxpayers who itemize.  

One strategy to address this is charitable bunching. If your itemized deductions are typically close to or below the standard deduction, you may consider combining several years’ worth of charitable contributions into a single tax year. Doing so can push your itemized deductions above the standard deduction in that year, allowing you to benefit from the full charitable deduction, while returning to the standard deduction in future years. 

Example: You typically donate $10,000 per year and have $23,000 of other itemized deductions, for total itemized deductions of $33,000. If the standard deduction is $32,200, only $800 of your charitable giving effectively produces a tax benefit. 

By contributing $40,000 in one year instead, your itemized deductions increase meaningfully above the standard deduction, allowing you to realize a larger tax benefit, while still maintaining your charitable support over multiple years. 

Beginning in 2026, a 0.5% AGI floor will apply to charitable deductions, meaning the first 0.5% of AGI donated will not be deductible. This makes bunching even more impactful. 

2. Donate Appreciated Stock Instead of Cash

When making charitable contributions, many donors default to giving cash. However, donating appreciated securities held for more than one year can often be more tax-efficient. By donating appreciated stock directly to a qualified charity, you can: 

• Avoid paying capital gains tax on the appreciation of the stock 
• Claim a charitable deduction for the full fair market value of the asset (subject to AGI limits) 

Example: If you own stock worth $10,000 that you purchased for $5,000, donating the shares directly allows you to avoid capital gains tax on the $5,000 appreciation while still receiving a $10,000 charitable deduction if you itemize. 

3. Use a Donor-Advised Fund (DAF) to Simplify Giving

Charitable bunching and stock donations can be powerful, but they can also create logistical challenges. For example, you may not want to give multiple years' worth of donations to charities all at once, or smaller charities may not be set up to receive stock donations. 

A donor-advised fund (DAF) can help address both concerns. A DAF is a charitable investment account that allows you to: 

• Receive an immediate tax deduction when you contribute assets 
• Invest those assets for potential tax-free growth 
• Recommend grants to charities over time, at your own pace 

DAFs can be funded with cash or appreciated securities and are available through community foundations or national custodians. 

Important update: Under OBBBA, charitable deductions available to non-itemizers beginning in 2026 apply only to direct cash gifts to charities, not to contributions made through DAFs. Therefore, DAFs remain best suited for itemizers and long-term planners. 

4. Make a Qualified Charitable Distribution (QCD) from Your IRA

Once you reach age 73, required minimum distributions (RMDs) from IRAs can significantly increase taxable income (RMDs begin at age 75 for anyone born after 1960).  Beginning at age 70½, you may direct up to $111,000 (2026; annually adjusted for inflation) from your IRA directly to a qualified charity. QCDs:  

• Satisfy RMD requirements 
• Are excluded from taxable income
• Do not require itemizing to receive a tax benefit 
• OCDs are not allowed to contribute to DAFs 

This exclusion from income becomes even more valuable under OBBBA, as higher standard deductions and additional deductions for retirees over 65 may limit the usefulness of itemized deductions for retirees. 

5. Offset Taxes in a High-Income Year

Charitable deductions are generally more valuable in years when your taxable income and marginal tax rate are higher. Events such as bonuses, business sales, Roth conversions, or large capital gains can create opportunities to offset income through strategic charitable giving.  

OBBBA permanently extended the current income tax brackets, including the 37% top rate, but introduced a limitation that effectively caps the value of itemized deductions at a 35% rate for taxpayers in the highest bracket, beginning in 2026. 

Coordinating charitable strategies in high-income years can still generate meaningful benefits, particularly when combined with appreciated asset donations or donor-advised funds. 

6. Offset Taxes on a Roth IRA Conversion

Roth IRA conversions can provide long-term tax benefits, but they also create immediate taxable income. Increasing charitable contributions in the same year may help reduce the overall tax impact. 

For retirees benefiting from the temporary Senior Bonus deduction (available from 2025–2028), careful coordination is required, as increased income from conversions can phase out part or all of that deduction.

7. Name a Charity (or your DAF) as a Retirement Account Beneficiary

Traditional retirement accounts are often among the least tax-efficient assets to leave to individual beneficiaries, particularly given current distribution rules that generally require inherited IRAs to be fully distributed within 10 years. Charities, however, can receive retirement assets income-tax-free. 

For donors with charitable intent, naming a qualified charity or a donor-advised fund as the beneficiary of a traditional IRA or qualified plan can be a highly tax-efficient way to leave a legacy. 

8. Integrate Gift Tax Planning into Your Strategy 

Charitable planning often overlaps with broader wealth-transfer goals. Understanding how annual gifts, lifetime exemptions, and charitable contributions work together is essential. OBBBA increased the federal lifetime gift and estate tax exemption to $15 million per person, beginning in 2026, and indexed it for inflation. While this creates additional flexibility, large gifts still permanently reduce the exemption available at death. 

Annual Gift Tax Exclusion 

You may gift up to the annual exclusion amount per recipient, per year, without gift tax reporting. The exclusion is indexed for inflation and remains a core planning tool for families. 

Over time, consistently using the annual exclusion can meaningfully reduce the size of a taxable estate without requiring complex planning or gift tax filings. 

Lifetime Gift & Estate Tax Exemption 

The One Big Beautiful Bill increased the federal lifetime gift and estate tax exemption beginning in 2026, creating additional flexibility for individuals and families with significant assets. Gifts that exceed the annual exclusion amount count against this lifetime exemption, rather than triggering immediate gift tax in most cases. 

While the higher exemption provides more room for planning, it remains important to be intentional about how and when lifetime gifts are made. Large gifts can permanently reduce the exemption available at death, making coordination with charitable and estate planning especially important. 

Why Distinction Matters 

Understanding the difference between gifts to individuals and gifts to charities is critical when evaluating tax efficiency. Gifts to individuals are not income-tax deductible and may require gift tax reporting if they exceed the annual exclusion. Charitable gifts to qualified organizations are generally income-tax deductible, subject to applicable limits. 

Coordinating annual gifts, charitable contributions, and estate planning strategies can help reduce future estate taxes while supporting both family and philanthropic goals. For example, a family may choose to make annual exclusion gifts to children and grandchildren while also funding charitable gifts through appreciated assets or a donor-advised fund. This approach can reduce the taxable estate, avoid capital gains tax, and preserve lifetime exemptions for future planning needs. 

Bring Strategy & Intention to Tax Planning with Lutz 

Any one of the strategies outlined above could help you optimize your charitable or gifting goals. In many cases, combining several of these strategies together in the same year can be beneficial. At the same time, you may need to make some hard decisions between these various options to decide which is best in any given year (e.g., deciding between utilizing a DAF or a QCD). Whatever your charitable plans may be for the coming year, Lutz’s Tax Planning Services can help you decide what’s most advantageous for you. If you have any questions or would like to learn more, please contact us.  

IMPORTANT DISCLOSURE INFORMATION

• Maximizer, Analytical, Futuristic, Relator, Strategic

Tom Hodgson, CFP®

Investment Advisor

Tom Hodgson, Investment Advisor, began his career in 2011. He has built extensive expertise in financial planning and wealth management while taking on leadership roles in training and estate planning initiatives. 

Focusing on helping clients achieve their most important goals, Tom creates tailored financial strategies for everything from retirement preparation to education funding. He stays closely connected with clients' changing needs, regularly reviewing their investment portfolios and providing practical guidance. Tom finds fulfillment in helping clients who have worked hard in their businesses or professions feel confident about their financial future, whether they're saving for college, a wedding, or planning for retirement. 

 

Tom lives in Elkhorn, NE, with his wife Carlie, their children Aubrey and Jack, and their dog Oakley. Outside the office, he can be found following the Jays and Huskers, cooking, golfing, and enjoying outdoor activities including hunting and fishing. 

402.827.2059

thodgson@lutz.us

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• Competition, Achiever, Relator, Focus, Arranger

Ben Burton

Tax Shareholder

Ben Burton, Tax Shareholder, began his career in 2006. Growing with Lutz since 2008, he has developed deep expertise in estate and gift tax planning while becoming a cornerstone of the firm's culture.

Specializing in tax consulting for closely held businesses and high-net-worth individuals, Ben focuses on creating comprehensive tax and wealth transfer strategies. He combines technical expertise with relationship-building skills to develop tailored solutions for complex tax scenarios. Ben values the opportunity to solve problems alongside clients and colleagues, taking a collaborative approach.

At Lutz, Ben makes the complex simple through his natural talent for arranging intricate tax planning solutions into clear, understandable terms. His ability to see how all the pieces fit together while explaining technical concepts in accessible terms has earned him leadership roles in the estate planning community, including serving as president of the Omaha Estate Planning Society.

Ben lives in Omaha, NE, with his wife, Kari Lou, and their five sons. Outside the office, he coordinates Lutz's Husker football tailgates, enjoys golfing and hunting, and cheering on his kids at their sporting events.

 

402.514.9168

bburton@lutz.us

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