Charitable giving is a meaningful way to support causes you care about, and many charitably minded people decide to give for reasons above and beyond personal financial considerations.

However, it is worth knowing how donations can help reduce your tax bill.

With the One Big Beautiful Bill Act (OBBBA) signed in 2025, the rules for charitable deductions are changing significantly in 2026.

Understanding these changes, and planning ahead, can help you maximize both your generosity and your tax benefits.

The following article:

• discusses key changes in the tax law related to charitable giving
• lists some tax-smart strategies to keep in mind
• explains how Medicare costs can be impacted by Qualified Charitable Distributions (QCDs)
• provides “optimization scenarios” designed to show how charitable giving can reduce your tax liability

Key Changes in the Tax Law – Summary

Detailed Explanation of Key Tax Law Changes

Universal Deduction

Starting in 2026, taxpayers who do not itemize can still claim a deduction for charitable giving.

This universal deduction allows $1,000 for single filers and $2,000 for married couples filing jointly. It applies only to cash donations to qualified operating charities (not donor-advised funds or private foundations).

This deduction is not subject to the new 0.5% AGI floor for itemized deductions of charitable contributions.

This change broadens access to tax benefits for middle-income households who typically take the standard deduction.

Itemized Deduction

In 2025, itemizers can deduct all qualified charitable contributions without restriction.

In 2026, itemized deductions for charitable giving are allowed only for amounts that exceed 0.5% of Adjusted Gross Income (AGI).

This may discourage smaller donations from itemizers who do not exceed the income floor.

Income Floor

The 0.5% AGI floor introduced in 2026 means that only charitable contributions above this threshold are deductible for itemizers.

For example, a taxpayer with $200,000 AGI must donate more than $1,000 before any of the donation becomes deductible.

This rule is intended to limit deductions to more substantial charitable contributions.

Taxpayers may choose to make larger charitable contributions in 2025 to avoid the floor when it goes into effect in 2026.

High-Income Deduction Rate

In 2025, high-income donors in the top tax bracket (37%) receive the full benefit of their charitable deductions.

In 2026, the value of these deductions is capped at 35%, even if the donor is in a higher bracket.

This reduces the tax incentive for large donations from wealthy individuals and may affect overall giving levels.

Tax-Smart Strategies for Charitable Giving

Universal Deduction

Starting in 2026, non-itemizers can deduct up to $1,000 (single) or $2,000 (married) for cash donations to qualified operating charities.

Bunching Donations

Combine multiple years of giving into one tax year to exceed the standard deduction and itemize.

Example: Instead of $5,000 annually for three years and claiming the standard deduction each year, accelerate giving plans: donate $15,000 in year one; itemize in year one to reduce tax liability; claim standard deduction in years two and three.

Giving Appreciated Assets

Individuals and couples with large brokerage (non-retirement) accounts can donate stocks, bonds, mutual funds, and exchange-traded funds that have increased in value directly to charitable organizations.

This approach avoids capital gains tax and allows donors to deduct the full fair market value of the donated securities, up to 30% of their AGI if the asset was held longer than one year.

If the asset was held less than one year, the deduction is limited to the cost basis of the asset.

Qualified Charitable Distributions (QCDs)

Individuals who are age 70½ or older can make donations directly from their IRAs. This approach is called a Qualified Charitable Distribution.

For those age 73 and older, the QCD counts toward the annual Required Minimum Distribution (RMD).

Also, the QCD is excluded from taxable income, so there is no need to itemize when utilizing this giving approach.

This strategy also helps lower the balance of the IRA, which could reduce RMDs (and taxable income) in future years.

QCDs are limited to $100,000 per person annually, and QCDs are not subject to the 0.5% “income floor” for those who itemize.

Why IRMAA Matters When Planning QCDs

If you’re on Medicare—or approaching eligibility—giving through Qualified Charitable Distributions (QCDs) can do more than reduce your tax bill.

It can also help you manage Medicare (Income-Related Monthly Adjustment Amount (IRMAA) surcharges.

IRMAA is an extra premium added to Medicare Part B and Part D for higher-income beneficiaries. It’s based on Modified Adjusted Gross Income (MAGI) from your tax return two years prior.

Crossing into a higher IRMAA bracket can increase your monthly premiums by hundreds of dollars per person.

QCDs from your IRA can lower your MAGI, and lower Modified Adjusted Gross Income may keep you below an IRMAA threshold, reducing or avoiding surcharges.

Note that giving away appreciated assets from an Individual or Joint brokerage account won’t have the same effect on IRMAA as donating from your IRA, because itemized deductions from charitable contributions are subtracted after AGI (and MAGI) is calculated.

Example: How Charitable Giving Can Lower IRMAA Costs

The example below presents typical Medicare costs for an individual with current income of $174,000, and with reduced income of $154,000 after completing a QCD from their retirement account.

In this example, the individual saved $1,570 because the $20,000 QCD is excluded from taxable income, reducing federal tax liability.

Optimization Scenarios

Below we present four scenarios designed to show how charitable giving can reduce tax liabilities and possibly lower Medicare premiums at different levels of income for individuals and couples.

Couple, Ages 45, Income $200,000

A charitably minded couple typically takes the standard deduction.

Strategy: Use bunching—donate $30,000 every three years instead of $10,000 annually.

Benefit: In the bunching year, they itemize and deduct the full $30,000, saving roughly $7,400 in taxes.

Individual, Age 55, Income $400,000

A high-income donor faces the deduction cap in 2026.

Strategy: Accelerate large gifts in 2025 to get full 37% deduction and donate appreciated stock.

Benefit: A $50,000 gift in 2025 saves $18,500 in taxes vs. $17,500 in 2026 while avoiding capital gains tax.

Couple, Ages 65, Income $250,000

A couple near retirement with a large balance in a Joint brokerage account wants to increase their charitable giving.

Strategy: Combine bunching with appreciated asset donations.

Benefit: Donate $40,000 in one year using appreciated securities, deduct full value, and avoid capital gains tax—potentially saving $10,000+ in taxes.

Individual, Age 73, Income $300,000

A charitably inclined individual will face a higher tax bill because Required Minimum Distributions will increase their taxable income.

Strategy: Use Qualified Charitable Distributions to donate $20,000 directly from IRA.

Benefit: Satisfies RMD, excludes $20,000 from taxable income, reduces AGI and possibly lowers Medicare premiums.

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Each year from mid-October through early December, Medicare enrollees have a window to make changes to their coverage. This article provides a guide for reviewing your Medicare and supplemental coverage.

At the end of this article, we provide a helpful “Should I Change My Medicare Coverage?” flowchart which you can download.

For plan year 2026, the Annual Open Enrollment Period (AEP) runs October 15 through December 7.

During this time, you can:

• Switch from Original Medicare + Part D to a Medicare Advantage plan
• Switch from one Medicare Advantage plan to another
• Drop Medicare Advantage and go back to Original Medicare (although in most states – except MA, CT, ME, and NY – Medigap insurers are not required to sell you a policy after your first year on Medicare if you don’t meet the medical underwriting requirements)
• Enroll in or change a Part D (prescription drug) plan

If you already have Medicare, this is your annual chance to reassess whether your coverage still meets your needs.

What Original Medicare Enrollees Should Review 

If you are enrolled in Original Medicare (Parts A & B), here’s what your annual review should focus on:

Part D Drug Coverage

• Setting up and reviewing your account at www.medicare.gov can be very helpful in comparing plans.
• Are your current medications still covered?
• Do the copays, coinsurances, and coverage tiers change for next year?
• Is your preferred pharmacy network still included?

Medigap / Supplement Policy Changes 

• Some insurers may raise premiums or adjust rate classes.
• In most states (except MA, CT, ME, and NY,) once your Medigap enrollment period is over, you may not be able to switch without medical underwriting, so changes are harder later.
• If your plan offers rate “community-rated” options or age-based rates, check how your premium may change.

Part B / Cost Increases & IRMAA 

• Expect the standard Part B monthly premium to rise to approximately $206.50 in 2026; higher-income beneficiaries may face steeper surcharges (in Medicare-speak, IRMAA: Income-Related Monthly Adjustment Amount)
• Also review the Part B deductible and coinsurance changes in your 2026 “Medicare & You” handbook.

Providers & Networks 

• Even though Original Medicare generally allows you to see any provider who accepts Medicare, certain supplemental or supplemental plan services (e.g. preventive benefits) may change coverage rules.
• Ensure your preferred physicians and hospitals still accept Medicare under the same terms.

Total Cost Projection

Your Medicare.gov account can help you:

• Add up your premiums (Parts B, Part D, Medigap) + estimated out-of-pocket (copays, deductibles) + travel/foreign care exposure.
• Compare competing Part D or Medigap policies in your area for cost savings.

What Medicare Advantage Enrollees Should Review 

If you currently have a Medicare Advantage (MA / Part C) plan, here’s a checklist:

Annual Notice of Change (ANOC) & Evidence of Coverage (EOC) 

• These notices typically arrive in September. They list changes in premiums, drug formularies, cost sharing, provider networks, and benefits.
• Review them carefully. If your plan’s changes make it worse for you (higher costs, your doctors dropped, drugs removed), consider switching.

Doctor / Hospital Network 

• Confirm that your preferred providers remain in-network under the plan for 2026.
• If your doctors shift networks, your costs could increase substantially.

Drug Coverage / Formulary Changes 

• Some drugs may be removed, moved to higher tiers (more costly), or require step therapy or prior authorization.
• Check whether your current pharmacy is still a “preferred” or in-network pharmacy.

Premiums, Deductibles, and Maximum Out-of-Pocket

• Even if your monthly premium stays low, changes elsewhere (higher outpatient copays, specialist costs, or hospital deductibles) can change your financial outcome.
• Also watch for plan design changes (e.g. shifting benefits to coinsurance vs fixed copays).

Supplemental / Extra Benefits 

• Many Medicare Advantage plans include extras (dental, vision, hearing, wellness, transportation). However, insurers are under budget pressure and may reduce or eliminate some supplemental benefits.
• Verify whether extras that matter to you remain part of the plan.

What’s Changing in 2026 (What to Watch For) 

Looking ahead to plan year 2026 for Medicare, here are some of the major shifts and pressures to be aware of:

Insurer Exits / Plan Reductions

• Several major carriers (Aetna, Elevance, UnitedHealthcare) are scaling back their Medicare Advantage or prescription drug plan presence in some markets.
• When a plan you’re enrolled in is discontinued, you’ll get a Special Enrollment Period (SEP) to choose a new plan. Some states also allow guaranteed issue rights to enroll in Medigap in that scenario.
• This website is one way to search for a new plan: medicareresources.org

Changes to Drug Pricing and Part D 

• The Inflation Reduction Act allows Medicare to negotiate certain prices for certain high-cost prescription drugs (Eliquis, Enbrel, Entresto, Farxiga, Imbruvica, Januvia, Jardiance, Flasp/Novolog, Stelara, Xarelto) starting in 2026.
• The out-of-pocket cap for Part D will increase (e.g., from $2,000 to $2,100) in 2026.
• Some insurers may face lower federal subsidy support, leading to premium increases or tighter formularies.

Premium Changes 

• While average MA plan premiums are expected to decline (or remain stable) in many areas, other costs may still rise (Part B premium increases, drug or service cost sharing).
• Part B premium increases are expected; some sources project it could reach ~$206.50 in 2026 (though that’s not yet final).

Benefit Reductions & Tighter Coverage

• Some insurers may reduce supplemental benefits (transportation, over-the-counter allowances, meal delivery) to preserve margins.
• Expect more restrictive prior authorization or utilization management in some plans.

You can find more information through this link: 10 Major Medicare Changes Coming in 2026

Tips for Choosing Wisely During Open Enrollment

• Start early — don’t wait until December. Review your ANOC/EOC as soon as you receive them.
• Use the Medicare Plan Finder at www.medicare.gov to compare all available plans in your ZIP code, using your actual drug list and preferred providers.
• Contact your State Health Insurance Assistance Program (SHIP) — free local counseling. In Massachusetts, this program is known as SHINE.
• Create a short “must-have list” for coverage (e.g. your physicians’ network, essential drugs, maximum acceptable cost increases) and screen plans against that list.
• Don’t just look at the monthly premium — total cost matters: premiums + cost sharing (copays, coinsurance, deductibles) + network adequacy.
• If your current plan is being discontinued, act quickly in the Open Enrollment period to select a new plan before coverage gaps arise.
• Document all your enrollment decisions, take screenshots, or save confirmation numbers — mistakes happen.

The flowchart below is a guide that helps you determine if you should change your Medicare coverage during open enrollment. Click on the image to download or print the chart.

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If you’re approaching 65, now is the perfect time to understand the Medicare rules and options so you don’t miss important deadlines. This article walks you through what you need to know as you prepare to enroll.

At the end of this article, we provide an “Am I Eligible for Medicare?” flowchart which you can download.

Who Needs to Sign Up for Medicare? 

• Most people become eligible for Medicare at age 65.
• If you are retired and not covered by an employer health plan, you’ll need to enroll in both Medicare Part A (hospital coverage) and Part B (medical/outpatient coverage) during your initial enrollment window.
• If you are still working at age 65, you should enroll in premium-free Medicare Part A while you have employer coverage, as it won’t affect your job-based insurance and can offer secondary coverage without a penalty.
• If you are 65, working, and covered by your (or your spouse’s) large employer health plan (20+ employees), you can delay Part B without penalty until you leave that employer coverage. You’ll have a Special Enrollment Period (SEP) for Part B that lasts until 8 months after your or your spouse’s employment or employer coverage ends.
• If your employer is smaller (fewer than 20 employees), Medicare generally becomes your primary insurance at 65, and you’ll need to sign up for both Medicare A and B to avoid gaps in coverage.

When Should You Sign Up? 

• Your initial enrollment period is a 7-month window around your 65^th birthday: the three months before your 65th birthday, the month of your birthday, and the three months after.
• Signing up before your birthday month ensures coverage starts as soon as you’re eligible.
• If you delay and don’t have other qualifying coverage, you may face late enrollment penalties that last for life. 

What Will Medicare Cost in 2026?

• Part A (Hospital Insurance): Generally premium-free if you or your spouse worked 10+ years.
• Part B (Medical Insurance): The standard premium is projected to be $206.50/month in 2026 (up 11% from the 2025 premium of $185/month.)
• Higher-income households may pay more due to IRMAA surcharges. With rising healthcare costs, it’s wise to budget for increases over time.

Original Medicare vs. Medicare Advantage 

Medicare Parts A (hospital) & B (outpatient) generally cover about 80% of health care charges in these two categories of care. Most people buy additional insurance to cover the remaining costs of care.

You will need to make a choice between two ways to get benefits to supplement Medicare A & B when you sign up. Below are more details on the two categories of Medicare.

Original Medicare

Original Medicare with a Medigap (supplement) policy offers the widest choice of doctors and hospitals since you can see any provider nationwide who accepts Medicare.

It works especially well if you travel frequently, are a “snowbird”, or want the flexibility to see specialists without referrals.

Pairing Original Medicare with a Medigap policy can help cover deductibles, coinsurance, and copays, giving more predictable out-of-pocket costs.

Most people also need to buy a separate Part D prescription plan, and total monthly premiums (Medicare + Medigap + Part D) can be higher than Medicare Advantage.

Medicare Advantage

Medicare Advantage plans, offered by private insurers, often bundle hospital, medical, and prescription coverage into one plan.

Many include extras like dental, vision, or gym memberships, and premiums can be lower than Original Medicare with a supplement.

However, Advantage plans typically use provider networks (HMO or PPO), which may limit your choice of doctors and hospitals.

Out-of-pocket costs can be less predictable because of deductibles, copays, and coinsurance, especially if you need specialized or out-of-network care.

There’s no one “best” option—it depends on your health, budget, and provider preferences.

Where to Get Help

• www.medicare.gov – The official Medicare website with enrollment and plan comparison tools. You can compare costs and coverage in your area for Medigap and for Medicare Advantage plans. If you set up your account and enter the drugs that you take, you can also compare the total cost of Part D insurers available to you.
• SHIP (State Health Insurance Assistance Program): Free counseling in every state.
• Generally, these services are available by calling your local senior center.
• In Massachusetts, this is called SHINE (Serving the Health Insurance Needs of Everyone).
• Your financial planner – We can help you evaluate Medicare choices in the context of your retirement income, taxes, and long-term health planning.

If you’re approaching age 65, don’t wait. Understanding when and how to enroll in Medicare—and what it will cost—can help you avoid penalties and find coverage that fits your needs.

The flowchart below is a guide that helps you determine if you’re eligible for Medicare Part A & Part B. Click on the image to download or print the chart.

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