Christopher Harris
Client Portfolio Manager
While many people tend to concentrate their charitable giving during the last few months of the calendar year, there are reasons for some clients to prioritize giving early this year. The new federal tax law enacted in July 2025, often referred to by its acronym OBBBA, takes effect this year and creates new thresholds and limits for the tax deductibility of charitable gifts for taxpayers who itemize deductions and a new opportunity for those who do not itemize. In addition, a third consecutive year of double-digit global stock market returns has multiplied unrealized gains on some large holdings in client portfolios, which presents an opportunity to gift highly appreciated shares to donor advised funds or directly to charities. Meanwhile, major cuts to federal safety-net and social-welfare programs, along with aggressive actions by federal immigration enforcement agents, have harmed vulnerable and disadvantaged communities across the country and strained the ability of frontline social-service organizations to meet the needs of these communities, making giving generously even more timely. By frontloading your 2026 charitable giving, you can maximize your immediate social impact while significantly optimizing your tax efficiency.
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The OBBBA has affected charitable giving with four key provisions. Not all of these provisions will affect you. Please consult your tax advisor or your portfolio manager at Zevin for guidance on which provisions may affect you and how.
1. Starting with the 2026 tax year, a taxpayer who itemizes deductions on their federal income tax return will only be able to deduct charitable contributions that exceed 0.5% of adjusted gross income (AGI). For example, assume Jane Smith has an AGI of $100,000 and makes $5,000 in qualified charitable contributions this year, while also planning to itemize deductions on her federal tax return. The first $500 of Ms. Smith’s charitable contributions will not be deductible, because it equals 0.5% of her $100,000 AGI. So, she can only deduct the other $4,500. What might this mean for you if you expect to itemize deductions and make charitable contributions exceeding 0.5% of your AGI? Consider combining annual gifts meant for 2027, and possibly for the next few years, into a larger gift this year, to clear the 0.5% of AGI threshold and to maximize tax efficiency. If you use a donor advised fund (DAF), you may find this approach practical as you can aggregate funds for charitable giving in your DAF and then gradually grant them to your selected charities over a timeline of your choosing.
2. The OBBBA permanently allows itemizing taxpayers to deduct cash contributions up to 60% of their AGI. This limit specifically applies to cash, rather than assets like stocks or real estate. For example, if Jane Smith has $100,000 of AGI and makes $70,000 in charitable contributions in 2026, only $60,000 would be deductible, after the 0.5% of AGI threshold is met.
3. A new provision now caps the tax benefit of charitable deductions at 35% for itemizing taxpayers in the 37% federal income tax bracket. What this means is that taxpayers in the 37% bracket will now only receive 35 cents of tax benefit for every dollar of deductible charitable contribution, rather than 37 cents per dollar as per previous law. For example, assume Mr. and Mrs. Jones are in the 37% bracket with $1,000,000 AGI and contribute $100,000 to various charities in 2026 (assuming they claim no other itemized deductions). First, subtract the 0.5% of AGI floor ($5,000), reducing the deductible charitable amount to $95,000. Then, multiply $95,000 by 35% (rather than 37%) to arrive at the tax savings of $33,250. Without this provision, the tax savings for the Joneses, being in the 37% bracket, could have been $35,150 (0.37 X $95,000) in this case.
4. Another provision presents an opportunity to taxpayers who do not itemize deductions. Those who use the standard deduction can now claim a charitable deduction of $1,000 per single filer or $2,000 per married filing jointly filer.
From the beginning of 2023 through the end of 2025, the ACWI global stock index returned roughly 20% annually. However, some holdings in our clients’ portfolios grew as much as 50% on an annualized basis during that same three-year period, now comprising significant outsized positions. ZAM portfolio managers proactively review clients’ portfolios to identify and recommend to clients such positions to donate.
Consider setting up a donor advised fund. If you are charitably inclined, you can reduce such overweight positions tax-efficiently by gifting shares to a donor advised fund. A donor advised fund (DAF) is essentially a tax-exempt charitable investment account, held at a sponsoring institution (such Schwab’s DAF affiliate DAFGiving360, The Boston Foundation, etc.), that acts as a conduit for charitable giving. It allows you to make tax-deductible contributions of appreciated securities (e.g. shares of Microsoft, Apple, etc.), reinvest those assets over time, and grant them out at a time of your choice to qualified not-for-profit organizations of your choice. A DAF also offers several other benefits that can make charitable giving easier. It can allow you to avoid the hassle of collecting and tracking contribution receipts from charities to provide to tax preparers. In many cases, DAFs allow small grants to charities, often as low as $100. You can also make grants anonymously through a DAF. Also, DAFs can facilitate making recurring grants to charities by saving the information on previous grants (e.g. the name and address of the charity, the amount of the previous grants, etc.) in an accessible format or interface. Many of our clients use DAFs as a key vehicle for their charitable giving. If you would like to learn more or explore how a DAF may benefit you, contact your Zevin portfolio manager or client service contact. Considering gifting through your retirement accounts. Another tax-efficient approach to charitable giving that we highly recommend for eligible clients is Qualified Charitable Distributions (QCDs). Clients over age of 70 ½ or older who have one or more IRAs (traditional, rollover, or SEP – any non-Roth IRA type is eligible) can make tax-exempt Qualified Charitable Distributions from an IRA directly to charitable organizations up to a limit of $111,000 in calendar 2026. The primary tax benefit of QCDs is that they are not included in the taxpayer’s taxable income and thus are tax-free distributions. Furthermore, if you must take Required Minimum Distributions (RMDs) from your IRA, you can use QCDs to satisfy these RMD obligations. For example, if you must take an RMD of $111,000 in 2026, you can make a QCD of $111,000 to fully satisfy the RMD. Also note that the 2026 limit of $111,000 applies per individual or account owner, not per tax return or household – in other words, for a married couple filing their taxes jointly, each spouse can make QCDs from their own IRA(s) up to the $111,000 limit in 2026. If you are eligible, the potential tax efficiency of QCDs as a key aspect of your charitable giving cannot be understated.
Let’s take a step back from the minutia of the mechanics of charitable giving and consider some reasons why giving matters so much today. There’s no question that many of us have been troubled by the news reports about dramatic changes unfolding in our society as a result of federal policy. The termination of USAID has had ripple effects around the world by putting millions of lives at risk, particularly in lower-income countries in the Global South. Closer to home, cuts to federal social-safety net programs (including SNAP, Medicaid, low-income heating assistance, etc.) have hit economically disadvantaged communities especially hard over the last several months, amid one of the coldest winters we’ve experienced in the last 10 or so years. Aggressive tactics being used by immigration enforcement agents have also made some communities particularly vulnerable and unable to meet their own basic needs without assistance from community-based organizations and generous neighbors. All of this intensifies the demands placed on nonprofit organizations on the frontlines of serving affected populations, such as basic-needs providers like food banks and shelters, legal aid agencies, and immigrant advocacy groups. We have a unique opportunity to help where it’s needed most. Charitable giving remains a powerful way to show up for our community at a time when that support has never been more critical.
Our team at Zevin Asset Management is ready to provide the personalized support you need to ensure your charitable giving is fulfilling, tax-efficient, and aligned with your financial goals.
Disclaimer: Zevin Asset Management is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.