Key Takeaways:
- In addition to supporting causes you care about, charitable giving can be a powerful tool to help San Diego retirees reduce taxable income, manage required minimum distributions, and offset capital gains.
- Retirees can explore various strategies, including donating long-term appreciated assets, using a donor-advised fund, or making a direct donation from an IRA to a qualified charity.
- Retirees should be aware of new tax laws taking effect in 2026 as part of the One Big Beautiful Bill Act, including a new 0.5% adjusted gross income (AGI) floor for itemized charitable contributions and a temporary above-the-line deduction for charitable donations for non-itemizers.
San Diego retirees often come to us looking for ways to make the most of their savings — for themselves, their families, and their communities. Charitable giving can play a significant role in retirement, whether you want to support a local or national organization or other causes close to you. With the right strategies, giving back can make a positive impact and also help reduce taxes in retirement, as well as manage high taxes in California. Let’s review tax-smart charitable giving strategies for retirees in San Diego, considering requirements, key steps, and how the tax landscape has evolved.
What Qualifies as a Charitable Contribution?
Tax deductions for charitable gifts encourage generosity and support for causes that benefit the community. Tax-efficient giving involves understanding what qualifies as a charitable contribution and the best way to leverage available tax breaks, per the IRS. Here is some of that criteria:
- Contributions must be made to an IRS-recognized charitable organization. This typically includes a public, tax-exempt 501(c)(3) charity, including religious, educational, and other groups.
- Contributions must be itemized on Schedule A, Form 1040.
- Limits apply to how much of a contribution you can deduct, depending on the charity.
- For cash donations to many organizations, the limit is 60% of your AGI.
- For non-cash donations, such as donating appreciated stock or giving to certain organizations like a private charity, the limit can range from 20% to 50%.
- You must keep records of your giving and provide documentation from the charity for donations that exceed $250.
- Contributions must be made by December 31 of the year you wish to claim them.
How Much Do I Need to Give to Charity to Affect My Taxes?
To help reduce your taxes in retirement, your itemized deductions must exceed the standard federal deduction. You cannot itemize charitable donations if you take the flat standard deduction.
- The standard deduction for 2025 is $15,700 for single taxpayers and $31,400 for married couples filing jointly.
- Your total itemized deductions, including things like medical expenses, property taxes, and charitable giving, must exceed the standard deduction to capture tax savings.
What Are the Charitable Contribution Deduction Limits?
As we’ve mentioned, limits apply to how much of your donations you can deduct, varying by type and amount. Additionally, if your contributions exceed the following AGI limits, you can carry forward your donations for up to five years. Here’s a simple breakdown:
- Cash Donations:
- You can deduct up to 60% of your AGI at the federal level. In California, state taxes limit deductions for cash donations to 50% of your AGI.
- Investments or Property Donations:
- Tax benefits apply to donations for long-term appreciated assets, such as stock or real estate you’ve held for more than a year that has increased in value since you purchased them, which could be particularly relevant to retirees. The IRS cap on non-cash donations is 30% of your AGI.
- Donating long-term appreciated assets often has more tax savings than selling and donating the cash, as asset donations are not subject to capital gains taxes.
- Donating assets directly helps you claim the deduction for the full fair market or current price and helps you and the charitable organization avoid paying capital gains taxes.
- Mixing Giving Strategies: It’s worth discussing with your financial advisor or CPA how a combination of cash and non-cash donations can help you maximize tax benefits.
What Are the Benefits of Charitable Contributions?
In addition to supporting the organizations, communities, and causes you care about, there are several tax and financial benefits of giving, including:
- Reduce Taxable Income: By itemizing deductions, you can reduce your taxable income and tax liability for the year.
- Reduce Capital Gains Tax: If you donate long-term appreciated assets, you can claim a deduction and avoid paying capital gains taxes.
- Maximize Impact with Donor-Advised Funds (DAFs): Acting like your own personal foundation, you can make larger lump sum donations to the DAF and recommend grants to your preferred charities over time. Using a DAF allows you to time your gifts, for example, during a high-income year when a large deduction gives you a larger tax benefit. Community foundations, such as the San Diego Foundation, are local organizations that help individuals establish and manage DAFs. Community foundations typically have a better understanding of local needs, offer more personalized assistance, and often provide opportunities to connect with other local donors.
- Estate Planning: The estate tax exemption for 2025 is $13.99 million for singles and $27.98 million for married couples. Estates that exceed these amounts are subject to taxes. Leaving charitable gifts in your estate at the time of your death can reduce the total value of your estate and the estate taxes your heirs owe.
- Offset Required Minimum Distributions (RMDs): Once you reach RMD age, you must take IRS-mandated withdrawals from taxable retirement accounts like a traditional IRA. California has nine steep income tax brackets, meaning income from RMDs can quickly push you into a higher state tax bracket.
- Qualified Charitable Distribution (QCD): To offset the tax liability, you can consider a QCD if you’re 70½ or older, which allows you to donate up to $108,000 from an IRA directly to an eligible charity (as of 2025). This strategy enables you to fulfill your RMD requirements without increasing your federal or state taxable income. Note these are separate from charitable contributions and itemized donations, but they still offer tax benefits.
What are the New Rules for Deducting Charitable Contributions?
As part of President Trump’s recently passed One Big Beautiful Bill, some tax rules are changing in 2026. Here are a few to keep in mind:
- The .05% Floor for Itemizers:
- A donation will only be tax-deductible at the federal level if it’s at least 0.5% of your AGI, a new requirement in 2026. For example, if your AGI is $200,000, you must give at least $1,000 to claim a deduction.
- Once you’ve met the 0.5% floor, you deduct up to the IRS limits for each type of donation. There is no floor in California for state taxes.
- New Charitable Deduction for Non-Itemizers: In 2026 through 2028, even if you claimed the standard deduction, you can still deduct up to $1,000 for singles and $2,000 for married couples for qualified, cash-only charitable deductions at the federal level.
- New Tax Treatment for Top Earners: In 2026, deductions for taxpayers in the highest tax bracket (37%) will be treated as if they’re in the 35% tax bracket, which will slightly devalue itemized deductions.
Get Expert Help for Smart Charitable Giving
Taking a strategic approach to tax planning is especially critical in retirement, as it helps reduce your taxable income, manage capital gains, and preserve more of your wealth for your family and community. These are only a few of the ways retirees can support the causes that mean the most to them while reducing their tax burden in retirement.
Before you make gifts to your favorite charities, you should consult your financial team (attorney, accountant, and financial advisor) to make sure they fit within your overall retirement and financial strategy. As San Diego retirement planners, we can help you create a charitable gift plan that aligns with local tax laws, your overall tax situation, and your giving preferences. Contact us today to learn how we can integrate a tax-efficient charitable plan into your retirement strategy.