There are three common ways to use life insurance for charity: name the charity as beneficiary (simple, no income tax deduction now, but an estate tax charitable deduction later), give an existing policy (deduction generally limited to the lesser of the policy's value or your cost basis), or let the charity own a new policy and give cash each year for premiums. Starting in 2026, itemizers can deduct charitable gifts only above 0.5% of AGI, the benefit of itemized deductions is capped at 35% for top-bracket taxpayers, and non-itemizers can deduct up to $1,000 ($2,000 joint) of cash gifts to public charities.
We are licensed insurance brokers, not CPAs or attorneys. Treat the tax and legal points on this page as general education, and confirm them with your own CPA or attorney before acting.
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What changed for 2026
The One Big Beautiful Bill Act changed charitable deductions starting with the 2026 tax year:
- 0.5% floor for itemizers: only charitable contributions above 0.5% of adjusted gross income are deductible. On $400,000 of AGI, the first $2,000 of giving produces no deduction.
- 35% cap on the benefit for top-bracket taxpayers: taxpayers in the 37% bracket get about 35 cents of tax benefit per dollar of itemized deductions, including charitable gifts.
- Non-itemizer deduction: taxpayers who take the standard deduction can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash gifts to public charities, not including donor-advised funds or supporting organizations.
- 60% limit made permanent for cash gifts to public charities.
- Corporations: a new 1% of taxable income floor on corporate charitable deductions.
Treasury guidance on some details may still evolve, so confirm current rules with your CPA before a large gift.
Three ways to give with life insurance
| Method | Income tax deduction | Estate tax effect | Control |
|---|---|---|---|
| Name the charity as beneficiary | None during life | Charitable deduction for the proceeds if the policy is in your estate | You keep full control and can change it |
| Give an existing policy | Lesser of fair market value or your basis (premiums paid, adjusted) | Removes the policy from your estate (subject to the three-year rule if you die soon after) | The charity owns it |
| Charity owns a new policy; you gift premiums | Cash gifts each year, subject to the 2026 limits | Outside your estate | The charity owns it |
How a donated policy is valued
Life insurance is treated as ordinary income property, so the deduction for giving a policy is generally limited to the lesser of its fair market value or your cost basis. Basis is usually the premiums you paid, minus dividends and tax-free withdrawals. Fair market value for a permanent policy is often near its interpolated terminal reserve, which the carrier can help determine. A policy you have owned a long time with a large cash value may produce a deduction well below that value. Policies with loans can create bargain-sale income. Non-cash gifts over $5,000 generally need a qualified appraisal, and Form 8283 is filed with your return.
Where insurance shines for giving
- Leverage: modest annual premiums can fund a much larger gift at death.
- Old policies you no longer need: a policy bought for estate tax that is now unnecessary can become a meaningful gift.
- Wealth replacement: donors who give appreciated assets to a charitable remainder trust sometimes buy life insurance in an ILIT to replace that value for their children.
- Bunching: with the new 0.5% floor, some donors concentrate several years of premium gifts into one year to clear the floor and itemize.
Coordinate with the charity's planned giving office; some charities have policies about owning life insurance. See our estate planning hub for related strategies.
Frequently asked questions
Can I deduct the cash value of a life insurance policy I donate?
Generally you can deduct the lesser of the policy's fair market value or your cost basis, not simply its cash value. A qualified appraisal is generally required for non-cash gifts over $5,000.
If I name a charity as my beneficiary, do I get a tax deduction?
Not during your life, because you keep control of the policy. If the policy is included in your estate, your estate generally receives a charitable deduction for the proceeds paid to the charity.
Are premiums I pay on a charity-owned policy deductible?
Gifts of cash to the charity to pay premiums are charitable contributions, subject to the usual limits and, starting in 2026, the 0.5% of AGI floor for itemizers or the $1,000 / $2,000 non-itemizer deduction.
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Tell us what the coverage is for and who it would cover. For most requests we ask for each person's date of birth and sex so Erik can prepare for the call. We do not ask health or tobacco questions in this initial request. This is a request for help, not an insurance application or a promise of coverage.
Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.