Charitable giving is one of the most meaningful ways to support causes you care about, and at the same time, it can provide valuable tax benefits. However, the rules surrounding charitable deductions can be complex, and the IRS is particular about what qualifies, how you document it, and when you can claim it.
If you’re planning to make a significant donation this year or next, it’s important to understand how these rules work, especially with major tax law changes taking effect in 2026. Here’s a clear breakdown of the essentials, based on recent IRS guidance and upcoming legislation.
1. Proper Documentation Is Essential
The documentation you need depends on what and how much you give. For cash donations, you’ll need bank records, credit card statements, or a written acknowledgment from the organization. For property donations, you must have a detailed description of the items and possibly a qualified appraisal if the value exceeds certain limits.
The IRS often disallows deductions that lack proper proof, so make sure your paperwork is solid. For a full list of documentation requirements, refer to IRS Publication 526 (Charitable Contributions), or better yet, have a tax advisor review your records before filing.
2. Will a Large Donation Raise Red Flags?
Many donors worry that a big charitable deduction might trigger an audit. The truth is, a large gift by itself doesn’t automatically prompt IRS scrutiny. However, deductions that appear unusually large compared to your income could be flagged.
The safest move is to ensure your donations are legitimate, properly valued, and well-documented. When your records are airtight, even a generous deduction will hold up under review.
3. Donating an Annuity Contract
If you plan to give an annuity to a charity, be aware that it may have taxable implications. Specifically, you could be required to recognize income equal to the annuity’s appreciation, the difference between its fair market value and your original investment (basis).
The good news: you may still qualify for a charitable deduction equal to the annuity’s fair market value, depending on your situation. However, because the rules are nuanced, professional tax advice is strongly recommended before completing the transfer.
4. Major Changes Coming in 2026
The One Big Beautiful Bill (OBBB) will change how charitable deductions work beginning January 1, 2026 (applying to 2026 tax returns filed in 2027). These updates could impact both itemizers and non-itemizers.
For Non-Itemizers (Standard Deduction Filers)
Starting tax year 2026, you’ll be able to deduct up to $1,000 (or $2,000 for joint filers) in charitable cash contributions, even if you don’t itemize.
For Itemizers (Schedule A Filers)
Charitable deductions will only apply to the portion of donations that exceed 0.5% of your Adjusted Gross Income (AGI).
- Example: If your AGI is $232,000 and you donate $14,000, only $12,840 of that donation would be deductible ($14,000 − 0.5% of $232,000).
This “deduction floor” will change how many taxpayers calculate charitable write-offs. Make sure you plan ahead before December 31, 2025, to maximize contributions under the current rules before the new thresholds take effect.
5. Donating Savings Bonds Before Maturity
If you’re considering donating Series I or EE savings bonds, be aware that doing so before they mature does not allow you to avoid taxes on deferred interest. The IRS requires that all accrued interest be reported as taxable income in the same year you make the donation.
That means your charitable gift could trigger additional income, so it’s smart to check the timing with a tax specialist to ensure you understand both the benefits and the tax impact.
Stay Compliant, Stay Generous With Help from Scout Tax
As charitable giving rules evolve, taxpayers need to stay informed and strategic. Whether you’re preparing for the 2026 deduction changes, managing complex donations like annuities or savings bonds, or simply ensuring your documentation meets IRS standards, expert guidance can make all the difference.
Scout Tax can help you:
- Confirm which donations qualify for deductions.
- Structure giving strategies to reduce your taxable income
- Prepare for the 2026 rule changes before they take effect.
- File accurately and confidently with full IRS compliance.
Don’t wait until 2026 to plan your charitable strategy.