Charitable Giving in 2026: New Rules, Donor-Advised Funds, and Appreciated Stock

The 2025 tax law changed the charitable deduction. In our view, the new rules reward planning and timing for generous Silicon Valley households.

In our experience, philanthropy is an important part of Bay Area culture, from large foundation gifts to steady support for local schools, food banks, and open-space groups. The tax treatment of those gifts changed on January 1, 2026, under the One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025. The changes do not eliminate the deduction, but they alter how much of a gift is deductible and, in our view, who benefits most.

What changed for itemizers

According to Greenberg Traurig's summary of the new rules, individual taxpayers who itemize now face two new constraints:

• A 0.5% floor. Charitable contributions are deductible only to the extent that total contributions for the year exceed 0.5% of your adjusted gross income. A household with $800,000 of AGI loses the first $4,000 of deductions.

• A 35% benefit cap. For taxpayers in the top 37% bracket, the value of the charitable deduction is limited to 35 cents per dollar rather than 37 cents.

The 60% of AGI limit for cash gifts to public charities was made permanent. Carryovers from gifts made before 2026 are not subject to the new floor when used in later years.

What changed for non-itemizers

For the first time in several years, taxpayers who take the standard deduction can deduct charitable cash gifts, up to $1,000 for single filers and $2,000 for married couples filing jointly. With the 2026 standard deduction at $16,100 for single filers and $32,200 for joint filers per the IRS, this is meaningful for households whose itemized deductions fall short of those thresholds.

Bunching and donor-advised funds

In our view, the 0.5% floor and the interaction with the standard deduction make "bunching" more attractive. Rather than giving the same amount every year, a household could concentrate two or three years of giving into a single tax year, exceed the floor and the standard deduction in that year, and take the standard deduction in the off years.

A donor-advised fund (DAF) can make bunching practical. As the IRS explains, a DAF is an account held by a sponsoring charity; the donor contributes to it and then advises on grants to other charities over time. Contributions are generally deductible in the year they are made, subject to the limits described in IRS Publication 526, and assets can be invested while they await distribution. DAF sponsors include national charitable organizations as well as local community foundations.

Giving appreciated stock

In our view, for many Silicon Valley donors the most tax-efficient gift is not cash but appreciated securities held more than one year. Under Section 170 of the Internal Revenue Code and as described in IRS Publication 526, donating such shares directly to a public charity or DAF generally allows a deduction for full fair market value, and the donor does not recognize the capital gain that a sale would trigger. Federal long-term capital gains are taxed at rates up to 20% under Section 1(h), the 3.8% net investment income tax may also apply, and according to the California Franchise Tax Board, California taxes capital gains as ordinary income, at rates up to 13.3% for the highest earners. As a result, the avoided tax on a large gift can be substantial. Per Publication 526, deductions for gifts of appreciated capital gain property to public charities are generally limited to 30% of AGI, with any excess carried forward for up to five years.

In our view, this approach can pair naturally with managing a concentrated stock position. Rather than selling low-basis employer shares to fund cash gifts, a donor could give the shares and use the cash they would have given to buy diversified investments at a new, higher cost basis.

Qualified charitable distributions

Under Section 408(d)(8) of the Internal Revenue Code and as described in IRS Publication 590-B, IRA owners age 70½ or older can make qualified charitable distributions (QCDs) directly from an IRA to charity. A QCD is excluded from taxable income and can count toward required minimum distributions. Because a QCD is excluded from income rather than deducted, it is our understanding that it is not affected by the new 0.5% floor or 35% cap. The annual QCD limit is indexed for inflation, and the statute excludes donor-advised funds as eligible recipients.

Other considerations

• Timing within the year. Gifts of securities can take days to settle; best practice is for year-end gifts to be initiated early in December.

• Substantiation. Per IRS Publication 1771, a single contribution of $250 or more requires a contemporaneous written acknowledgment from the charity. Per the instructions for Form 8283, non-cash gifts valued above $5,000 generally require a qualified appraisal, with exceptions that include publicly traded securities.

• Private company stock. Gifts of pre-IPO shares to a DAF or charity are possible, but they may require a qualified appraisal under the Form 8283 instructions, and transfers are often restricted by the company's bylaws or shareholder agreements.

• California. California generally follows federal rules for charitable deductions, with some differences, and applies its own limitation on itemized deductions for high earners under Revenue and Taxation Code Section 17077.

Closing thought

We believe the new rules add friction for modest annual gifts but leave the core benefits of giving appreciated assets intact. A giving plan that coordinates timing, asset selection, and an appropriate vehicle can make each dollar go further for the causes you care about. This article is educational only and is not tax advice; consult a qualified tax professional regarding your specific situation.

Important Disclosures

Important Disclosures: Propulsion Capital Management is an investment adviser registered with the State of California Department of Financial Protection and Innovation. Registration does not imply a certain level of skill or training. This article is provided for general informational and educational purposes only and does not constitute investment, tax, legal, or accounting advice, nor an offer or solicitation to buy or sell any security or to adopt any particular investment strategy. The information is believed to be accurate as of the date of publication but is subject to change without notice; tax laws and regulations change frequently, and their application depends on individual facts and circumstances. Nothing herein should be relied upon as a substitute for personalized advice from a qualified professional. Investing involves risk, including the possible loss of principal, and past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss. Any examples are hypothetical, are for illustrative purposes only, and do not reflect the experience of any client. Links to third-party websites are provided for convenience; Propulsion Capital Management does not endorse, and is not responsible for, the content of third-party sites. Propulsion Capital Management does not provide tax or legal advice; please consult your tax adviser or attorney regarding your specific situation.