The Charitable Giving Playbook: Appreciated Stock, Bunching, DAFs, and QCDs

The four techniques that do the most work in charitable tax planning are giving appreciated securities instead of cash, bunching several years of gifts into one tax year, using a donor-advised fund to separate the timing of the deduction from the timing of the grants, and, once you are 70 and a half, making qualified charitable distributions directly from an IRA. Two changes effective in 2026 make this planning more valuable, not less. Itemizers may now deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income, a new floor, and taxpayers in the top bracket see the benefit of itemized deductions capped at 35% rather than 37%. Both changes reward concentrating gifts into fewer, larger years rather than spreading them evenly, and both leave the QCD untouched as the most efficient giving tool available to those old enough to use it.

Why give appreciated securities instead of cash?

This is the single most efficient move available to most donors, and it is widely underused. When you donate a security you have held longer than a year directly to a public charity, two things happen at once: you generally deduct the full fair market value, and you never recognize the capital gain. The charity, being tax-exempt, sells it without tax.

Contrast that with selling the stock yourself and donating the proceeds. You realize the gain, pay federal capital gains tax, potentially the 3.8% net investment income tax, and any state tax, and then donate what remains. The charity receives less and you deduct less. Giving the security directly avoids that leakage entirely.

Two limits apply. Gifts of appreciated long-term securities to public charities are deductible up to 30% of adjusted gross income, versus 60% for cash, with a five-year carryforward of any excess. And the asset must have been held more than one year; short-term holdings are deductible only to the extent of your basis. For anyone holding a low-basis or concentrated position, this technique also does double duty as a way to reduce concentration, a theme we develop in managing a concentrated stock position.

What changed for 2026, and why does it favor bunching?

Two provisions of the One Big Beautiful Bill Act took effect in 2026 and reshape the arithmetic.

First, itemizers now face a 0.5% AGI floor on charitable deductions: only contributions exceeding half a percent of AGI are deductible. A household with $1,000,000 of AGI loses the deduction on the first $5,000 given each year. Spread evenly across five years, that floor is absorbed five separate times. Concentrated into one year, it is absorbed once.

Second, for taxpayers in the top bracket, the tax benefit of itemized deductions is capped at 35% rather than the full 37% marginal rate, which slightly reduces the value of each deducted dollar at the very top.

Both changes point in the same direction. Because the standard deduction remains high and the new floor penalizes small annual gifts, the efficient pattern is to bunch: concentrate two, three, or five years of intended giving into a single tax year, itemize substantially in that year, and take the standard deduction in the intervening years. Your charities need not experience the lumpiness, which is where the donor-advised fund comes in.

How does a donor-advised fund fit?

A donor-advised fund solves the timing mismatch that bunching creates. You contribute a large amount in one year and take the deduction that year, then recommend grants to charities over the following years at whatever pace you choose. The charities receive steady support; you receive a concentrated deduction.

A DAF also pairs naturally with appreciated securities, since most sponsors readily accept them, sell them tax-free, and credit the full value to your account. That makes the DAF the usual vehicle for a large one-time gift funded with low-basis stock, particularly in a high-income year such as the year of a business sale, a large bonus, or a Roth conversion, when the deduction is worth the most.

The trade-off is that the contribution is irrevocable and you retain only advisory privileges over grants, not legal control. Whether a DAF or a private foundation better fits your goals depends on your priorities around control, cost, privacy, and family involvement, which we compare in donor-advised fund vs. private foundation. For donors who want an income stream alongside the gift, charitable remainder trusts and CLATs address a different set of objectives.

What is a qualified charitable distribution, and why is it now more valuable?

A qualified charitable distribution, or QCD, allows someone age 70 and a half or older to direct money from an IRA straight to a qualified charity. For 2026 the limit is approximately $111,000 per person, indexed annually. The transfer is excluded from income entirely rather than deducted.

That distinction is what makes the QCD so efficient, and more so under the new rules. Because the amount never enters adjusted gross income, it bypasses the 0.5% floor completely, delivers a benefit even to taxpayers who take the standard deduction, and lowers AGI itself, which can reduce the taxability of Social Security benefits and help manage Medicare IRMAA surcharges. A QCD can also satisfy part or all of a required minimum distribution, which is often the most valuable feature for retirees who must take RMDs they do not need for spending. The interaction with RMDs and bracket management is covered in tax-smart withdrawal sequencing.

Several rules govern QCDs. The funds must go directly from the IRA custodian to the charity, never through your hands. QCDs are available from IRAs but not from active employer plans such as a 401(k). Donor-advised funds and private foundations are not eligible recipients, which is a common misunderstanding. And the age threshold is 70 and a half, which is earlier than the current RMD age, so there are years in which a QCD is available before any distribution is required.

The techniques compared

A worked example: same giving, different result

The following is a hypothetical illustration, simplified and ignoring state tax. A married couple with $1,000,000 of AGI intends to give $50,000 a year to charity for five years, $250,000 in total.

Under the annual approach, they give $50,000 in cash each year. The 0.5% AGI floor disallows $5,000 each year, so $45,000 is deductible annually, and they absorb that floor five separate times, losing $25,000 of deductions across the period.

Under the bunched approach, they contribute $250,000 of appreciated stock to a donor-advised fund in a single year, then recommend $50,000 of grants annually so their charities see no change. The floor applies once, disallowing $5,000, so roughly $245,000 is deductible. They also avoid capital gains tax on the appreciation embedded in the stock, which cash giving would never have addressed, and they take the standard deduction in the four following years. The gift to charity is identical in both cases; the tax outcome is materially better in the second. The example is hypothetical, and the 30% AGI limit on appreciated-property gifts would require carrying forward part of the deduction, which is permitted for up to five years.

Frequently asked questions

Why donate stock instead of cash?Donating long-term appreciated stock directly lets you deduct the full fair market value while never recognizing the capital gain, so the charity receives more and you keep more. Selling first and donating the proceeds triggers tax that giving the security directly avoids.

What is the new 0.5% charitable floor?Beginning in 2026, itemizers may deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income. Because the floor applies every year, spreading small gifts across many years wastes more deduction than concentrating them.

What is charitable bunching?Concentrating several years of planned giving into one tax year so you can itemize substantially in that year and take the standard deduction in the others. A donor-advised fund lets you do this without changing the pace of support your charities receive.

How much can I give through a QCD in 2026?Approximately $111,000 per person, indexed annually, available from an IRA once you reach age 70 and a half. The amount is excluded from income rather than deducted, and it can count toward your required minimum distribution.

Can I make a QCD to my donor-advised fund?No. Donor-advised funds and private foundations are not eligible QCD recipients. QCDs must go directly from the IRA custodian to a qualifying public charity.

What are the AGI limits on charitable deductions?Generally 60% of AGI for cash gifts to public charities and 30% for gifts of appreciated long-term property, with a five-year carryforward for amounts above the limit. Gifts to private foundations face lower limits.