It’s that time of year again … required minimum distribution crunch season! (I bet you thought I meant the holidays … those too!)
Think fast … what do you get when you combine the IRS requirement that you withdraw a certain percentage of your retirement assets each year once you hit your 73rd birthday – and endless TV commercials showing pictures of hungry children, sad puppies, and natural disasters, with the narrator asking for your donations in the tone of God?
If you guessed a “Qualified Charitable Distribution,” give yourself a gold star and a steaming cup of eggnog if you can stand it!
Meet our good friends the Johnsons (not their real names). This generous couple loves any excuse to send donations to their favorite philanthropic causes … especially when they get the warm fuzzy feeling of a tax deduction on top!
They called us after seeing a passing article about the new charitable giving rules in the One Big Beautiful Bill Act (OBBBA).
Suddenly, the first 0.5% of their income wasn’t deductible using the donations from their regular checking accounts. Their carryover deductions seemed to vanish. They joked that the IRS was the Grinch stealing Christmas. That’s when we showed them a way to give that kept their generosity while lowering their taxes … Imagine That!™
Table of Contents
What's Changing in 2026
For itemizers, you can only deduct gifts above 0.5% of your adjusted gross income. Below that, no deduction. Bummer!
Top‑bracket donors will only save 35 cents for each dollar donated (down from 37).
However, non‑itemizers get a new $1,000 deduction ($2,000 if married) right off the top.
Cash gifts remain deductible, subject to 60% of AGI, and non‑cash gifts follow 30% or 20% limits. Our message is to plan now to avoid losing valuable deductions.
Don't Lose Your Old Deductions
Unused deductions can be carried forward for up to five years and must be claimed consecutively. Contributions made before 2026 aren’t subject to the new 0.5% floor when used later. (Whew!)
Translated into what you can do this year … max out those charitable contributions! Have a favorite cause that you love? Give them the Christmas gifts they want … donations.
(Our COO would also like to note that if you don’t have a favorite cause, you’re welcome to email her and she will happily provide you with a list of potential new favorites.)
Qualified Charitable Distributions: An Antidote
If you’re 70½ or older, a Qualified Charitable Distribution lets you send IRA money straight to charity. And, it counts toward your required minimum distribution! You can give up to $108,000 per person in 2025, and projections suggest around $115,000 in 2026. Couples each get their own limit.
It skips your tax return, so it does not increase AGI and works whether or not you itemize. For our friends, the Johnsons, a QCD turned a taxable RMD into a tax‑free gift.
QCD versus Cash Giving
- QCDs lower your adjusted gross income
- No need to itemize
- Great for those with high RMDs or who won’t exceed the 0.5% threshold.
Cash or appreciated assets are deductible if you itemize and exceed the 0.5% floor.
Starting next year, you can use donor‑advised funds, appreciated securities, or an insurance contract to avoid capital gains. Consider bunching several years of donations into 2025 to maximize deductions before the floor and cap kick in.
When Giving More Than the QCD Cap
Just a few ideas:
- Bunch donations into 2025 or 2027 to clear the 0.5% floor
- Donor-advised funds let you take the deduction now and recommend grants over time
- Appreciated stock or real estate can remove capital gains and provide a deduction
- Charitable trusts or gift annuities convert donations into lifetime income while benefitting the philanthropic causes that matter to you
- Insurance contracts can create tax-free cash that funds future gifts
(Our attorney would like me to note at this point that you should always get advice from your specific financial or tax advisor who is familiar with your unique situation. This is for educational purposes only.)
Your Holiday Checklist
- Take inventory of existing carryovers and RMDs (or both!)
- Decide whether QCDs and/or regular gifts make sense for your situation
- Update your estate plan and beneficiary designations
Looking Ahead
The Johnsons discovered that thoughtful planning allowed them to keep giving generously and lower their tax bill. They ended up bunching donations into this year for all their favorite philanthropic causes, as well as setting up QCDs for the future.
As you gather with family this holiday season, reflect on what matters most. Let’s make your generosity meaningful and tax‑efficient … Imagine That!™
Imagine That!™ is a complimentary bi-monthly newsletter provided by Wealth Legacy Group®, Inc. that addresses various topics of interest for high-net-worth and high-income business owners, professionals, executives and their families. Sign up to receive our monthly newsletter here.
R. J. Kelly, Wealth Legacy Group®, Inc. – November / December 2025
Header image on Canva, one design use license.