limited to $ 20,000.
What’ s more, beginning in 2026 there’ s a 35 % cap on all federal deductions for itemized contributions, including charitable contributions, even if you’ re in the highest tax bracket, which is currently at 37 %. For example, an earner whose adjusted gross income is $ 1 million sees their last dollar of income being taxed at 37 %, while the donation is getting a credit against taxable income of only 35 %. In 2025, a $ 25,000 charitable contribution saved $ 9,250 in federal taxes( 37 % of $ 25,000). But in 2026( after the new tax legislation comes into play) that same contribution will save only $ 7,000 in federal taxes( 35 % of $ 20,000).
So what should clients do in 2026 and beyond? The answer is simple: Give more, or bunch their giving. If they are already going to miss out on the deduction for that first 0.5 % of adjusted gross income regardless, making smaller annual contributions hurts more. By super-funding a donor-advised fund with a larger, multiyear contribution all at once, they blunt the painful impact of the new deduction rules and maximize the tax credit on the remaining 99.5 % of their gift.
Other Ways To Fund
Sometimes the tax benefits are enough that people will consider different uses of the vehicle even if they have more modest giving plans. At Tocqueville Asset Management, we recently had a conversation with a client who wanted to sell highly concentrated stock while also making a donation; the idea was that the tax benefits of the contribution would help offset capital gains. However, the client didn’ t necessarily want to increase the size of their own donor-advised fund at that point.
Instead, we established new donor-advised funds for their teenage children and transferred some money from the parents’ fund to each of the kids’ funds. This solution got the parents tax benefits and reduced their highly concentrated holdings— and they were simultaneously able to get the next generation thinking about philanthropy in a tactical way so the kids could give to the causes that are important to them.
Closely Held Businesses
These advantages don’ t just apply to stocks and bonds. You can also donate an interest in a closely held business to a donor-advised fund.
One of our clients at Tocqueville owned a rental property through a limited liability company and planned to sell it for about $ 1 million. Nearly all of that was capital gains, since the property was purchased by the client’ s grandparents in the 1950s and gifted down through the generations— which meant there was a carryover cost basis rather than a step up. The client was hoping to not only offset this tax somewhat but also super-fund their donor-advised fund with roughly $ 100,000.
By super-funding a donoradvised fund with a larger, multiyear contribution all at once, clients blunt the painful impact of the new deduction rules and maximize the tax credit.
The solution we came up with was to assign a 10 % interest in the LLC directly to the donor-advised fund. Upon the sale, $ 100,000 went to the fund( which gave the client a full tax deduction against ordinary income). The amount subject to capital gain was thus cut by $ 100,000.
There’ s one caveat in this strategy, however: The gift to the donor-advised fund( in this example, an assignment of LLC interest) must be done before there is a signed contract for the sale. If the donation happens after the contract is signed, the IRS won’ t approve the tax benefit. Still, if it’ s done correctly, this is a wonderful tool to reduce tax liability and refill your charitable gas tank.
Donor-advised funds can also be used in conjunction with other vehicles to make estate planning more efficient and practical.
Take, for example, another one of our clients who sold a 50 % stake of their employee-owned business to a private equity firm. They received a large infusion of cash for this stake, and it was also more or less a 100 % long-term capital gain, which meant a hefty tax bill was looming. It was not, however, necessarily practical to put millions of dollars into a donor-advised fund to avoid a tax hit and meanwhile leave the clients’ children with nothing( other than the ability to give gifts to charities).
So we hammered out another solution: Working with the client’ s trust and estate attorneys and CPAs, we created and seeded a charitable lead annuity trust with a 20-year term, setting a fixed dollar amount( based on a prevailing interest rate) to be paid to a charity each year. Ideally, the trust is invested in a way that earns at least as much as the mandatory payout. At the end of the 20 years, what’ s in the trust gets transferred to another one outside the grantor’ s estate for the benefit of their children.
The trick here was that the charity named as the payout recipient can be, yes, a donor-advised fund! So, in essence, this client is making the annual payment to their own donor-advised vehicle— which they have access to for their own philanthropic endeavors— and at the end of the term, their heirs are still likely to walk away with a nice sum, and all the while the client gets the significant up-front tax deduction they needed in the year the huge capital gain was incurred.
When you combine a charitable lead annuity trust with a donor-advised fund in this way, any asset growth above that prevailing interest rate at the time the trust was set up transfers to the children entirely tax-free at the end of the term( in this case, 20 years). That makes it an incredible wealth-transfer tool in a highperforming market. A win-win.
These are just a few examples of how working with donor-advised funds can be helpful. These tools have been around for a long time, but as financial advisors, we can work with our clients and their strategic tax professionals to brainstorm solutions that are effective and, in many cases, super simple to implement.
MICHAEL T. MELTZER is a portfolio manager at Tocqueville Asset Management.
JULY / AUGUST 2026 | FINANCIAL ADVISOR MAGAZINE | 19