When advising high-income taxpayers on charitable giving, the focus should extend beyond the year-end check. A thoughtful structured gift can support a meaningful cause while aligning with your tax, investment, and financial plans.
Changes taking effect in 2026 make it increasingly important to coordinate charitable giving with taxable income and long-term financial goals.
Before you make a substantial gift, taxpayers should consider three planning opportunities.
Before Donating Cash, Look at Appreciated Assets
If your investment portfolio includes holdings that have increased significantly in value, cash may not be the most tax-efficient asset to donate.
Suppose you purchased stock for $20,000 and it is now worth $50,000. If you sell it first, you may recognize a $30,000 capital gain before contributing the cash. Depending on your circumstances, donating eligible appreciated property directly to a qualified charitable organization may allow you to claim an eligible charitable deduction while avoiding recognition of the embedded capital gain.
The rules vary depending on several factors, including:
- the type of property contributed
- how long the property has been held
- the recipient organization
- applicable adjusted gross income(AGI) limitations
The IRS also imposes additional reporting and valuation requirements for many noncash contributions.
Tip for a More Tax-Efficient Way to Give: before writing a large check, ask whether an appreciated investment could be a more tax-efficient gift.
High-Income Years May Be the Best Years to Give
If this is an unusually high-income year for you, perhaps because of the sale of an investment or a business, a significant bonus, stock-based compensation, a large capital gain, or an exceptionally profitable business year, charitable planning may be especially valuable.
Beginning in 2026, itemizing taxpayers generally may deduct charitable contributions only to the extent they exceed 0.5% of AGI. That new floor makes the timing and amount of a gift more important to plan in advance.
Instead of giving the same amount every year, you may benefit from combining several years of charitable contributions into one carefully chosen year. This strategy, often called bunching, may help your contributions clear the applicable deduction floor and other itemized-deduction thresholds.
A donor-advised fund may help you put this strategy into practice. You may be able to make a larger contribution in one year, claim the applicable deduction that year, and then recommend grants to charitable organizations over time. The deduction and timing rules still depend on the type of contribution, the recipient, and your individual circumstances.
The tax rules should not dictate your charitable goals, but they can influence the most efficient way to accomplish them.
The Value of Itemized Deductions Has Changed for Top-Bracket Taxpayers
For 2026, the top individual federal income tax rate remains 37%, applying above specified taxable-income thresholds.
The law also introduced a new overall limitation affecting certain itemized deductions for taxpayers in the highest tax bracket. The result is that taxpayers should not automatically assume that a $1 charitable deduction produces tax savings equal to their highest marginal tax rate.
For significant donors, tax modeling can help answer three important questions:
- What should I contribute?
- When should I make the contribution?
- How will the gift interact with my income, investments, and other deductions?
These questions become particularly important when charitable giving coincides with major financial milestones.
A More Strategic Approach to Charitable Giving
If you are considering a substantial charitable contribution this year, we can help by reviewing the following areas with you:
- Projected income: Is 2026 income expected to be unusually high or low?
- Investment portfolio: Do you hold appreciated assets that you were already considering selling or rebalancing?
- Timing: Would concentrating multiple years of giving into one year create a more favorable tax result?
- Documentation: Larger noncash contributions may require Form 8283, qualified appraisals, and additional substantiation.
Proactive Planning. Practical Strategies.
The larger or more complex your gift, the more valuable it is to plan before you make the contribution. A conversation now can help you avoid surprises and choose an approach that supports both your charitable goals and your broader financial plan.
Charitable planning begins with the causes and organizations that matter the most to you. From there, thoughtful planning can help you determine which asset to give, when to give it, and how the contribution fits within your broader financial strategy.
About McConnell Jones
Founded in 1987, McConnell Jones (MJ) is a nationally recognized CPA firm delivering Assurance, Tax & Accounting, and Advisory services across a broad range of industries. Headquartered in Houston, Texas with offices in Washington, DC; Dallas and Austin, Texas; Durham, North Carolina; and Atlanta and Columbus, Georgia, MJ provides integrated, high-quality solutions backed by specialized expertise and a client-focused approach.
Related Guidance
ARTICLE: Charitable Giving Changes in 2026 | Tax Deductions & Planning
Source(s):
- Topic no. 506, Charitable contributions | Internal Revenue Services
- Updates to the 2026 Form 1040-ES (NR) | Internal Revenue Services
- IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill | Internal Revenue Services
Tax Disclaimer: This communication is for general informational purposes only and is not intended as tax advice. Application of tax laws depends on specific facts and circumstances. Please consult your tax advisor before taking action.