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Although many farmers don't often consider gifting or charitable donations, they can be a good tax strategy. I've included a few tax benefits of charitable giving in other articles, but a deeper dive might be worthwhile with changes under the One Big Beautiful Bill Act (OBBBA).

Let's start with what changed under OBBBA. Starting in 2026, if you don't itemize, you can still take up to a $1,000 (single) or $2,000 (married filing joint) deduction for cash contributions to charities. For those who itemize, charitable deductions will be subject to a 0.5% floor. That is, an amount equal to the first 0.5% of adjusted gross income would not be deductible, but anything over that amount would be. And, for those with high incomes, OBBBA caps the tax benefit for contributions at 35% (even if the taxpayer is in the 37% bracket). Although not a deduction, there is a tax credit of up to $1,700 for charitable contributions to scholarship-granting organizations for elementary and secondary education scholarships.

Now, let's talk about some of the benefits of charitable donations. The most frequent donation I see is the qualified charitable donation (QCD) from an IRA. This allows farmers who reach the age of 70 1/2 to donate up to $111,000 (in 2026) directly to a charity. The benefit of a QCD is that you don't have to pay tax on the IRA distribution to the charity; however, you don't get to deduct the amount given to charity (that would be double-dipping). One limitation is that QCDs can't be made to a donor-advised fund or a private foundation.

With the rise in the stock market, many people have appreciated stock. You can donate stock and receive a charitable deduction equal to its fair market value. This makes donating stock much more appealing than selling the stock and donating the proceeds.

A great option for farmers is to gift commodities. Instead of selling commodities to an elevator or cooperative, the farmer can deliver the grain in the name of the charity. The charity gets the proceeds, and the farmer does not report the sale of the grain. There are a few benefits to commodity gifting. First, if the farmer does not gift enough to exceed the standard deduction, he or she can still receive a tax benefit. Second, gifting commodities removes them from income and, in turn, reduces self-employment tax. For farmers who give smaller amounts more frequently, commodity gifting may be the best method to donate to charities.

Finally, charitable remainder trusts (CRTs) provide a tremendous ability to transfer a large amount of money to charities. I have previously written about CRTs and the economic benefits for the donors, but in most cases, the remainder that goes to charities is rather large. And, if the donor contributes assets to the CRT with basis, that basis can be used as a charitable deduction. A CRT is not only a good exiting strategy but also a great way to give to charity. See more on CRT at https://www.dtnpf.com/….

As you can see, gifting and charitable donations can provide a tax benefit while fulfilling a charitable intent. If you have a tax bill and a charitable intent, look at some options with your tax professional.

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DTN Tax Columnist Rod Mauszycki, J.D., MBT, is a tax principal with CLA (CliftonLarsonAllen) in Minneapolis, Minnesota. Read Rod's "Ask the Taxman" column at https://www.dtnpf.com/….

Rod Mauszycki can be reached at taxman@dtn.com

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