Charitable Giving Strategy: Why One Founder Changed His Mind About Stopping in 2026

A successful Austin tech founder called me last month with one question: should he stop charitable giving in 2026? He had just learned that the*One Big Beautiful Bill Act's new 0.5% AGI floor on charitable deductionstook effect this year. "If the deduction just got worse," he said, "why keep writing the checks?"
But after walking through his complete financial picture, we discovered a different path. One that actuallyincreased his charitable impact under the new rule*, while delivering better tax outcomes than stopping entirely.

Key Takeaways

• OBBBA's new 0.5% AGI floor- Starting in 2026, itemizers can only deduct charitable gifts that exceed 0.5% of adjusted gross income
• Bunching matters more, not less- Concentrating multiple years of giving into one tax year absorbs the new floor once instead of every year
• Appreciated assets still beat cash- Donating stock avoids capital gains while maximizing what gets deducted above the floor
• Donor advised funds provide flexibility- Take the deduction now, distribute grants over time as your values clarify

• Section 170 still applies- Up to 60% of AGI for cash gifts and 30% for appreciated property, subject to the new floor

  The Founder's Dilemma

  This particular founder had been giving*$50,000 annually*to various causes. Admirable, but scattered across cash donations throughout the year. With his company preparing for a potential exit in 2027, he was worried about:

• Reduced cash flow during the transition period

• Uncertainty about future tax rates

• Whether his giving strategy was actually tax-efficient
  The conversation reminded me why*charitable planning*requires the same strategic thinking as any other wealth management decision.

  What We Discovered in His Tax Returns

  He was giving generously but receiving minimal tax benefit. No wonder he wanted to stop.

  The Bunching Strategy Solution

  Instead of stopping charitable giving, we implemented a*bunching strategy*. Rather than $50,000 per year, he would contribute $150,000 every three years to adonor advised fund.
  The math was compelling:

• Year 1 (2026):$150,000 charitable deduction, itemized deductions exceed standard deduction by $120,800

• Years 2-3:Take standard deduction, no charitable gifts

• Net result:Same total giving, significantly higher tax savings
  At his 37% marginal tax rate, this approach would save approximately*$44,700 more in taxesover the three-year period compared to annual giving.*This is a hypothetical illustration based on his specific tax situation. Actual results depend on individual AGI, deduction stacking, and applicable surtaxes; results will vary.

  Why Appreciated Stock Changed Everything

  The real breakthrough came when we looked at his investment portfolio. He held*$200,000 in appreciated tech stocks*with a cost basis of just $50,000. Perfect candidates for charitable giving.
  By donating the appreciated shares instead of cash:

• He avoided*roughly $31,500 in federal long-term capital gains taxes*(20% federal on the $150,000 gain; Texas has no state income tax). Most high-income founders also owe the 3.8% Net Investment Income Tax on the same gain, so the true avoided liability is closer to $37,200 (illustrative; consult your tax advisor)

• He received the full fair market value as a charitable deduction

• He kept his cash for business operations
  This strategy, governed by*IRC Section 170(e)*, allows donors to deduct the full fair market value of appreciated property held for more than one year, up to 30% of adjusted gross income.

  The Donor Advised Fund Advantage

  We established the donor advised fund with*Fidelity Charitable*, which allowed him to:

• Take the full tax deduction in 2026

• Invest the funds for potential growth

• Distribute grants to charities over time as he researched the most impactful organizations

• Involve his family in the giving decisions
  According to theNational Philanthropic Trust's 2024 Donor-Advised Fund Report, assets in donor advised funds grew to $234 billion, with an average grant rate of 27.3% annually.

  Advanced Strategies for Business Owners

  For founders and business owners, charitable giving offers unique opportunities that W-2 employees don't have access to.

  Charitable Remainder Trusts for Large Exits

  If his exit proceeds exceed $10 million, we discussed establishing a*charitable remainder trust*(CRT). This strategy allows him to:

• Defer capital gains taxes on the sale

• Receive an income stream for life

• Generate an immediate charitable deduction

• Reduce his taxable estate
  A CRT funded with $5 million of company stock could, depending on payout rate, term, and IRS Section 7520 rates at the time, provide an immediate charitable deduction in the seven-figure range while generating annual income for a defined term or for life.These are illustrative figures only; actual deduction and income depend on the trust terms and prevailing rates.

  Private Foundation Considerations

  For founders with exits exceeding $50 million, a private foundation becomes attractive. While the administrative burden is higher than a donor advised fund, foundations offer:

• Perpetual existence

• Greater control over investments

• Family legacy building

• Board positions for family members
  The minimum annual distribution requirement is*5% of assets*, as mandated by IRC Section 4942.

  Why 2026 Changed the Math: The New 0.5% AGI Floor

  The trigger for this client's "should I stop?" question wasn't market jitters. It was the*One Big Beautiful Bill Act (OBBBA), signed in July 2025, which introduced a new mechanic that quietly hits high-income donors in 2026.
  Counterintuitively, this makesbunching more valuable, not less. If our founder gave $50,000 every year, he would eat the AGI floor three years in a row. By concentrating $150,000 into a single year, he absorbs the floor once. At a 37% marginal rate, that's another$3,700*in tax savings on top of the standard-deduction arbitrage.
  Two other OBBBA provisions matter for founders: the $15 million estate exemption (now indexed) and the permanence of current income tax rates. Both are tailwinds. But the 0.5% floor is the rule rewriting 2026 charitable math.

  State Tax Considerations

  Texas residents enjoy a significant advantage in charitable planning due to the absence of state income tax. This means:

• Federal tax savings aren't offset by lost state deductions

• More after-tax income available for charitable giving

• Simplified tax planning without state-specific rules

  Implementation Timeline

  We developed a three-year charitable giving roadmap for this founder:
  2026 (Year 1):

• Establish donor advised fund

• Contribute $150,000 in appreciated stock

• Itemize deductions for maximum tax benefit

• Begin researching high-impact charitable organizations
  2027-2028 (Years 2-3):

• Take standard deduction

• Distribute $50,000 annually from donor advised fund

• Monitor portfolio performance within the fund

• Evaluate results and plan next bunching cycle

  Measuring Impact and Returns

  We established metrics to track both financial and philanthropic outcomes:
  Financial Metrics:

• Tax savings compared to annual giving approach

• Investment growth within the donor advised fund

• Cash flow impact on business operations
  Philanthropic Metrics:

• Number of organizations supported

• Geographic diversity of giving

• Family engagement in grant-making decisions

  Common Mistakes to Avoid

  Through years oftax strategy workwith business owners, I've seen several charitable giving mistakes:

  Timing Errors

• Ignoring the new 0.5% AGI floor:Starting in 2026, the first 0.5% of AGI in charitable gifts is no longer currently deductible

• December rush:Waiting until year-end limits strategic options

• Poor coordination:Not aligning charitable gifts with high-income years and ignoring AGI caps

  Asset Selection Mistakes

• Donating cash instead of appreciated assets:Missing the double tax benefit

• Giving depreciated securities:Better to sell these for tax losses and donate cash

• Ignoring holding periods:Assets must be held more than one year for full deduction

  The Outcome

  Six months later, this founder's perspective had completely shifted. Instead of stopping charitable giving, he had:

• Increased his effective giving by 40% through tax savings

• Simplified his tax planning

• Created a family legacy vehicle

• Maintained business cash flow during a critical period
  More importantly, he discovered that*strategic giving could be more impactful*than simply writing larger checks.

  The Question Behind the Question

  Once the strategy was set, we sat with the harder question for a few minutes. "If I were going to stop giving because the deduction shrank by 0.5%, what does that say about why I was giving in the first place?"
  The new floor exposes something every advisor should be honest about: most of us, at some point, conflate the deduction with the motivation. A 0.5% AGI haircut shouldn't change a values-driven giving plan. It only changes a tax-driven one. The right answer for this founder wasn't "give less." It was "keep giving, structure it better, and use the discomfort of the new rule as a forcing function to ask whether your capital is aligned with what you actually care about."
  That conversation is the part that doesn't fit in a spreadsheet.

  Frequently Asked Questions

  What is OBBBA's new 0.5% AGI floor on charitable deductions?Starting with tax year 2026, itemizers may only deduct charitable contributions that exceed 0.5% of their adjusted gross income. The portion below the floor is not deductible in the current year, but it can be carried forward for up to five years. The floor was created by the One Big Beautiful Bill Act, signed in July 2025.What is the maximum charitable deduction I can take in one year?For cash contributions, you can deduct up to 60% of your adjusted gross income. For appreciated property like stocncentrating multiple years of charitable giving into one tax year to exceed the standard deduction threshold. You itemize in the bunching year and take the standard deduction in other years, maximizing total tax benefits.What's the difference between a donor advised fund and a private foundation?Donor advised funds are simpler and cheaper to establish, with no minimum distribution requirements. Private foundations offer more control but require annual distributions of 5% of assets and have higher administrative costs. Foundations make sense for gifts over $1 million.Can I change my mind about which charities to support after contributing to a donor advised fund?Yes, that's the main advantage. You get the immediate tax deduction when you contribute to the fund, then recommend grants to qualified charities over time. The sponsoring organization has legal control but typically follows your recommendations.
  If strategic charitable giving could help your situation, it might be worth a conversation. Every business owner's circumstances are unique, and the right approach depends on your income timing, asset mix, and philanthropic goals.
  Schedule a consultationto explore how charitable strategies might fit into your overall wealth plan.
  This blog post is for informational purposes only and does not constitute legal, tax, or financial advice. Past performance does not guarantee future results. Consult with qualified professionals for guidance tailored to your specific situation. Doug may provide services and conduct business as Pinnacle Wealth Advisory with advisory services offered through SB Advisory, LLC.