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Accounting Today
Accounting Today
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In 2026, charitable giving strategies for high-income taxpayers and retirees are changing as new tax rules under the One Big Beautiful Bill Act (OBBBA) alter how deductions are calculated. Planning now can help these groups preserve both philanthropic impact and tax efficiency as new thresholds and limitations take effect.
Starting this year, two new limitations will affect the financial advantage of giving:
For taxpayers who have relied on itemized deductions to offset taxable income, these changes could significantly reduce the financial benefit of giving.
For further information, read our related insight: What the One Big Beautiful Bill Means for High-Net-Worth Individuals
A Qualified Charitable Distribution (QCD) is a direct transfer of funds from an individual retirement account (IRA) to a qualified charitable organization. Available to individuals aged 70½ or older, QCDs satisfy required minimum distribution (RMD) requirements without increasing taxable income.
Already an efficient giving tool, QCDs become even more valuable under the 2026 rules because they:
Key features include:
Consider a retiree in 2026 with a $100,000 RMD, married filing jointly, age 65+, and no mortgage interest or other charitable contributions. State and local tax deduction is capped at $10,000.
Scenario 1: Using a QCD
The retiree donates $50,000 directly to charity via QCD. In this case, the standard deduction is more beneficial ($35,400 for married filing jointly, age 65+). Only $50,000 of the RMD is taxable income because the other $50,000 is excluded. Plus, the lower AGI may reduce Medicare premiums, and there is no need to meet the 0.5% AGI threshold or worry about the 35% cap. The retiree can enjoy savings at their marginal tax rate (e.g., 37% bracket = $18,500 in tax avoided).
Scenario 2: Traditional Donation (No QCD)
If the retiree takes the full $100,000 RMD into income and then donates $50,000 to charity not via QCD, only $47,500 is deductible (after the 0.5% AGI floor), with a maximum of 35% in tax savings. The taxpayer can itemize, but they’d lose the standard deduction. The charity still receives the full amount, but the donor’s tax savings are limited ($47,500 x 35% = $16,625 max). Since AGI remains higher because the full $100,000 is included, Medicare premiums may also be higher.
Result
When comparing the tax savings in the two scenarios ($18,500 with QCD vs. $16,625 without), the QCD saves at least $1,875 more, plus the benefit of the standard deduction and the lower AGI, which can reduce Medicare costs.
By incorporating QCDs into your giving plan, you can:
This strategy transforms charitable giving from a simple act of generosity into a tax-smart approach.
The clock is ticking. Now is the time to integrate QCDs into your giving strategy.
At Elliott Davis, our High-Net-Worth Team specializes in tax-efficient solutions tailored to individuals and retirees. From QCD planning to estate coordination, we’ll help you preserve wealth, reduce tax exposure, and make a lasting impact.
Contact us today to explore strategies that align with your financial goals and philanthropic vision.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
In the disposition phase of the capital cycle, compensation strategy becomes a critical lever for success. When cash flows in from an exit, how you reward and retain top talent can determine whether your firm sustains momentum or loses its competitive edge.
An exit event introduces both opportunity and risk. Payout structures must balance reward with retention, address tax consequences, and align executive interests with both the long-term success of the business and the immediate financial boon of the disposition.
Although these decisions often feel like end-of-cycle considerations, the truth is they should be mapped out years in advance. A well-designed compensation plan attracts high-performing team members, incentivizes results, and differentiates your firm in a competitive market.
Real estate firms may consider several different approaches to compensate key employees during an exit. Five common approaches are outlined below. Each method varies in complexity, tax treatment, and its ability to drive retention and performance. Understanding these options early helps firms choose strategies that align with their goals and support transaction success:
Description: Cash paid upon closing, often discretionary.
Pros: Simple to implement; no legal hurdles.
Cons: Taxed as ordinary income and subject to employment taxes; offers no ownership and limited retention incentive.
Best For: Firms seeking a quick, straightforward solution.
Description: Key employees receive units in the General Partner (GP) entity, sharing in profits earned at exit.
Pros: Taxed at capital gains rates; strong alignment with deal success.
Cons: Requires legal structuring and increased tax compliance; vesting schedules and forfeiture rules must be clear.
Best For: Firms wanting to share in economic upside without requiring capital investment.
Description: Employees invest alongside Limited Partners (LPs), often through sponsor-assisted vehicles.
Pros: Creates “skin in the game”; promotes deal success.
Cons: Requires upfront capital; weaker retention if ownership persists after departure.
Best For: Firms fostering entrepreneurial culture and shared risk.
Description: Employees earn a share of the GP’s disposition fee upon successful closing.
Pros: Guaranteed payout tied to closing; drives focus on maximizing overall sale value.
Cons: Taxed as ordinary income; rewards short-term results over deferred success.
Best For: Property managers and operational leaders directly influencing exit outcomes.
Description: Employees share in company profits over time, often through vested equity interests.
Pros: Aligns interests with firm growth; shares in ordinary and capital gain income.
Cons: Complex to structure; requires valuations, complex allocations, and legal oversight.
Best For: Larger institutional firms and Real Estate Investment Trusts (REITs) seeking sustained engagement.
Each compensation structure comes with distinct and far-reaching implications. Bonuses are typically taxed as ordinary income and subject to employment taxes, which can significantly reduce the net benefit for recipients. In contrast, carried interest and co-investment options often qualify for more favorable capital gains treatment, creating a meaningful tax advantage.
Equity-based plans can trigger multi-state filing requirements, and structures like GP interests or long-term incentive plans (LTIPs) require extensive legal work. This includes drafting operating agreements, establishing vesting schedules, and defining forfeiture provisions, which all demand careful planning to support compliance and reduce risk.
Compensation strategy should be integrated into your growth plan early, not left until closing. Standardized, firmwide approaches build trust and consistency while reducing the risks of case-by-case decisions. Most importantly, your approach should extend beyond the transaction to encourage commitment from key employees.
By aligning rewards with performance and retention, you assemble the right team to drive results across every project and achieve a successful exit.
Contact us today to start developing your compensation strategy.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
In construction, where margins are tight and competition is fierce, contractors can no longer rely on gut instinct or legacy relationships alone. Winning work and keeping it profitable requires a data-driven strategy. That strategy starts with benchmarking and key performance indicators (KPIs).
Real-time KPI dashboards allow stakeholders to assess operational efficiency and financial health. These metrics help measure progress, align teams around shared priorities, and demonstrate value to clients and bonding companies. However, KPIs are only as good as the data behind them. If your data is unreliable or untimely, your decisions will be too.
In this article, we explore how contractors can use benchmarking and KPIs to sharpen their bids and improve margins.
Benchmarking empowers contractors to make smarter, data-driven decisions by comparing performance against industry standards, competitors, or internal historical data. It helps answer important questions like: Are we bidding competitively? Are we managing cash flow effectively? Are we operating as efficiently as we think?
Since contractors tend to be highly competitive, benchmarking naturally appeals to them, providing meaningful comparisons and insights that reveal strengths, expose weaknesses, and guide continuous improvement. There are three primary types of benchmarking to consider:
Incorporating post-project reviews into your benchmarking process adds another layer of insight, helping teams pinpoint what worked, what didn’t, and how to improve outcomes in future projects.
Begin with a few high-impact KPIs and expand as your data maturity grows. Focus on metrics that have the biggest financial impact, such as labor costs, overhead and indirect costs, material costs, cash flow, and project timelines.
Some common construction industry KPIs include:
Use dashboards to visualize performance and track financial ratios like current ratio, quick ratio, and working capital. This helps identify cash flow issues before they erode margins.
Caution: Interpreting KPIs without context leads to flawed conclusions. For example, a low equity ratio might be justified by a year-end distribution or strategic reinvestment. Contractors must understand the “why” behind the numbers, especially in the middle market, where financial sophistication varies.
KPIs vary by sector, size, location, seasonality, and strategic goals. For example, contractors scaling up should focus on efficiency and cash flow, while those preparing for a sale or succession should prioritize profitability and leverage. If reinvesting capital, tighter performance ratios are expected.
To use KPIs effectively, contractors should connect them to relevant benchmarks, choose benchmarking peers in the top quartile or those facing similar challenges, conduct post-project reviews, and leverage data to predict and mitigate risks. This enables contractors to:
Contractors gain a competitive edge when they treat KPIs as dynamic, evolving elements of their business strategy. When these indicators are aligned with strategic intent and grounded in reliable data, they become powerful tools for driving growth, enhancing margins, and building long-term resilience.
To protect healthy margins and secure or maintain bonding capacity, contractors must stay vigilant about key financial warning signs. These indicators often point to underlying issues that, if left unaddressed, can erode profitability and jeopardize long-term stability.
Common red flags include:
Routine monitoring for these red flags helps contractors catch and resolve problems early, make informed decisions, and maintain credibility with lenders, bonding companies, and stakeholders.
Caution: A mismatch between backlog and equity, such as a $150 million backlog with only $3 million in equity, will raise concerns for bonding companies and potentially limit growth.
The ratios you prioritize should reflect your current business objectives—whether you're scaling, preparing for sale or succession, or reinvesting capital.
Below are key categories and examples of ratios commonly used in the construction industry:
Frequency matters. Liquidity ratios may be reviewed weekly, while leverage and efficiency ratios are best assessed quarterly or semi-annually to evaluate long-term stability and operational effectiveness.
Strategy directs focus. If you’re preparing for a sale or succession, prioritize profitability and leverage ratios. If you’re scaling, focus on efficiency and cash flow.
Ready to see how your business stacks up against the competition? Contact our Construction team to run a benchmarking report and analyze your current KPIs. Let’s turn your data into decisions and your decisions into wins.
For more insights, check out our related article on cash flow tips in construction.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
