Year-End Charitable Giving: How to Maximize Deductions Under the New Tax Rules

In this episode, PCM financial advisors Andrew Randisi and Christopher Mallon discuss smart charitable giving strategies in light of the upcoming 2026 tax law changes. Learn how to make the most of new deduction limits, navigate the 0.5% AGI floor, and decide whether to give now or wait until next year. From cash gifts to appreciated stock donations, they share practical ways to maximize your impact while reducing your tax burden.

🎧 Perfect for anyone looking to give more intentionally—and more efficiently—this year.

Thank you for listening. For more information about how we can help you achieve your financial goals and live a life you love, please visit PCMAdvisors.com.

Transcript

Lesley: Welcome everyone today we're talking about charitable giving. As we approach year end, this is often a good time to think about your charitable giving strategies and there's some changes that my colleagues here would like to discuss with you. I'm joined by Andrew Randisi and Christopher Mallon.

They're both certified financial planners here at Pennsylvania Capital Management. And as I said, we're gonna talk about charitable giving, so take it away guys. 

Chris: All right. Do you wanna start us off, Andrew, where you may go? 

Andrew: Sure. I'd say the recent tax legislation that passed in July had a couple of sweeping changes and some of the things that now are being affected for tax year 2026 are going to be new, there are new rules for gifting.

Most [00:01:00] specifically, and we can get right into it. One of the very things when a lot of us that think of charitable gifting comes to mind is gifting cash donations to a public charity. Whether that be donating a few hundred dollars to the US, A-S-P-C-A or the Ronald McDonald House it is now changing the amount that is able to be deducted in a current year. And this has actually gotten a little bit more generous. In previous, in 2025, for example, if you donate cash to a public charity, you're able to deduct up to 50% of your adjusted gross income for cash donations. Starting in 2026, that has increased to 60%.

So, I'd say as an example if one had a adjusted gross incomes in 2026 of a hundred thousand dollars per year, they could gift $60,000, up to 60%, of cash contributions to a public charity. [00:02:00] Now, what begs the question, what happens? And we've seen, we have some clients that do this. What happens if I gift more then I exceed that 60% threshold with my gifting?

It's not the end of the world. What essentially happens is anything in excess gets carried forward and it can be carried forward up to five years into the future. Real cap, I'd say real property mainly stock, if you donate investment securities, stocks... stocks or bonds, investments, ETFs of that that is still up to 30% can be donated to charity and you can get a 30% deduction against your adjusted gross income. That did not change. Just cash. 

Chris: Alright, makes sense. And then how's this tie into the new floor that comes in? So, I guess it's you're getting the extra, 10% right? That can be offset against your adjusted gross income.

But now there's a floor you have to pass right? In order to essentially get that. Correct. 

Andrew: Yes, exactly. for clients who itemize, there is gonna be a new floor, which would [00:03:00] be a half of a percent of your adjusted gross income. So, I would go back to that example.

Essentially what, it's similar to how we have, there's floors for qualified medical expenses. In this case, if your adjusted gross income would be a hundred thousand dollars and you wanna donate to charity, you have to be above that half a percent floor. So, in that example, half a percent of a hundred grand is $500.

Your charitable contribution becomes deductible so long as you donate greater than $501. So I go back to that example of client X, Y, Z donates $60,000. That $500 floor kicks in of that $60,000 contribution, or donation, $59,500 ($60,000 minus $500) is actually the item is actually the charitable deduction that goes 

 on your itemized taxes for extra 2026. [00:04:00] Now, what happened to that 500 bucks? That 500 bucks that kind of got caught in the floor, that gets carried forward and can be taken at a later date up to five years into the future. 

Chris: Okay. Makes sense. So, what it and this is something we've talked about with clients sometimes too.

What it's essentially incentivizing in a way, is to look at bunching when it comes to charitable gifting. And this is something we've talked about before, a little bit. Bunching being instead of in theory think and say, okay, I'm gonna give, I give $10,000 a year every year to X, Y, and Z charity. Instead of maybe something to consider would be, okay, maybe we do $20,000 in this year to really get past that half a percent floor, and then again to take advantage of the higher percentage of the AGI number too. Again, depending, it all depends on where your income is and how much charitable giving is being done.

Because then you can take more advantage of, again, that 60% and then get past that floor, so less and less of it gets evened up by the, the half a percent [00:05:00] floor. So, it's something we always look to consider instead of just simply, oh, we'll spread it out equally every single year. Let's bunch it all together knowing that if some stuff is in excess of that 60% anyway, we can roll it forward to future years.

Instead of simply just spreading it all out. 

Andrew: Yeah, precisely. And I'd say in most cases if our clients, they're not necessarily donating cash. They're donating marketable securities, which falls under third, which falls under a 30% AGI. Which makes things even a little bit tighter to wanna be mindful of.

I'd say an example with this, and because of the half a percent floor if you have a client making a million dollars, 'cause I have a hundred grand, was a. It was a pretty easy floor to hit million dollars. That client needs to donate at least $5,000 and a dollar of stock cash, et cetera to even get the deduction to qual, to be able to right, able to count on their taxes.

So what really comes into play is what you just precisely said, that bunching strategy. Maybe instead of [00:06:00] donating $10,000 to charity every year, that's been going on or less. For tax year 2025 double down, do 20 and then skip 2026. 

Chris: Yeah 'cause if you're gifting in 2025 while you're giving up that potential higher number on the on the AGI, so instead of 60%, it's 50% say we're doing cash then.

But you're don't have the floor to deal with for 2025. 

Andrew: Exactly. You don't have that floor to deal with. 

Chris: Yep. So, it makes sense to pull stuff in forward here. Now conversely, one of the other changes is on the if you're taking the standard deduction, so this is going to be a majority of, even, probably most of our, or at least a good bit of our clients, and a majority of, tax filers out there will be taking the standard deduction starting in 2026.

So not 2025. If you are single in filing, you're able to deduct another $1,000 for charitable gifting. Or if you're married, it'd be $2,000 which is [00:07:00] a, pretty significant change from years past, or I've been some history of it for smaller amounts. But even if you're not itemizing, if you're typically, if you're not itemizing and you do charitable gifting, that's great.

However, it doesn't you don't get to take it off with your your taxes, but now they're adding a separate, essentially one line item or hey, up to $2,000 for a couple or a thousand dollars for a single person to, to deduct off of, the top line of their income to help with taxes too. So that'd be something where if you are taking standard deductions and doing charitable gifting, maybe it makes sense to, to wait until 2026 to make that happen.

So, then you can take advantage of that new that new change. 

Andrew: Yeah, and the one thing also be mindful of the, we'll call it the new non-itemizers charitable giving deduction. It must be cash only. 

Chris: Right. 

Lesley: To take advantage of the 1000 or 2000? 

Andrew: Yeah, the 1000 or the 2000. it must be cash.

Lesley: Okay, that's a great point. So just to reiterate that, so if you are not itemizing. [00:08:00] It makes sense to hold off on your charitable contributions until 2026 'cause you'll get a tax break. 

Andrew: Exactly, and I know that might be putting the charity might between, in the rock, between a rock and a hard place, 'cause usually the charities love getting the donations in the current year. Just maybe deferring until January will get the funds to the charity, be able to satisfy the charitable goal that you have to, and you can enjoy the benefit of the tax deduction. 

Lesley: Makes sense. I like that one. Any other any other points on charitable giving to cover here, guys? 

Chris: I think that's it for today. There's some other little nuances here and there. Again, this isn't all encompassing in a, yeah, 10 to 15 minutes here. But those are the heavy hitting changes. Really some stuff to consider before the last few months of the year when you're looking at, okay, what's my tax picture look like?

Are we itemizing this year? Okay, great. Let's see if we could, take advantage of the changes or before changes set into, gift more [00:09:00] this year or, potentially wait till next year if yeah, not itemizing. 

Andrew: The one thing that I would say for our listeners and viewers out there, you'll, and this is going to be for the non or actually for itemizers. If you're able to work with your accountant/tax professional and try and get an idea of what your income is by the end of the year or look like what your or also can forecast what your income might be for next year, that would be great.

That way you can be at ahead of, if you are gonna be donating in 2026, you know what your floor is. So, you know how much you need to get, you need to donate to charity to get above that floor. 

Chris: Makes sense. 

Lesley: Great. So, this is a great topic to discuss with your tax professionals and obviously Chris and Andrew are here to answer any questions that we can help with as well.

Thank you everybody for joining us today and we will see you next time. 

Andrew: Bye-bye. 

Chris: Bye.