With 2026 in full swing, it’s time to make sure you understand the tax law changes introduced by the One Big Beautiful Bill Act (OBBBA) last summer that take effect this year. At LattaHarris, we’ve been proactively monitoring these changes and how they can impact our clients. Donating grain to charities has historically been more tax advantageous than donating cash. However, OBBBA made the tax advantages greater, and we want to make sure our clients understand how this may benefit them based off their personal tax situation.
Excluding Income vs. Claiming a Deduction
The real benefit from commodity giving comes down to one core concept: it is better to prevent income from being recognized than it is to claim a deduction.
When you sell grain and donate the cash, you must first report that sale as income. This means you pay federal income tax, self-employment tax, and state income tax on it before you can use it as a gift. Even then, there are certain restrictions and limitations as to how much of the donation can be used to generate a tax savings benefit.
When grain itself is donated, the income from the grain sale is not reported on your tax return since you did not receive this income; the charity sold the grain and received the income. That means it reduces taxable income and self-employment income for an individual tax filer. Because the OBBBA’s new restrictions target deductions rather than excluded income, the traditional grain strategy bypasses the new limitations. The chosen charity receives the same financial gift, but the donor’s personal tax bill is lower.
Why Cash Donations Lost Their Luster
The OBBBA altered the charitable giving landscape for cash donors in two major ways. First, there is a new floor for charitable deductions set at 0.5% of adjusted gross income (AGI). That means donations that are less than 0.5% of AGI cannot be taken as an itemized deduction. There are certain circumstances where the disallowed deductions may be allowed to be carried forward; however, that is not a guarantee. Because a grain donation excludes it from income, it is not subject to the new charitable donations floor.
Second, the legislation set the 2026 standard deduction at $32,200 for married couples. This high threshold means even more farm families will take the standard deduction rather than the itemized deduction that has been historically required to be claimed to receive a tax benefit from cash donations. While Congress did create a small concession allowing standard-deduction filers to deduct up to $2,000 for MFJ taxpayers for cash gifts to public charities, those tax savings are typically minimal in comparison to the savings generated from a traditional grain transfer.
Doing It Right: How to Avoid IRS Red Flags
If a commodity donation is executed incorrectly, the IRS will reclassify it as a cash gift, triggering the tax situation that the donor was trying to avoid. To ensure a clean transfer of ownership, the charity must legally own the grain before it is sold.
At a commercial elevator, this means the storage receipt must be put in the charity’s name, accompanied by a letter confirming their ownership and their right to direct the sale. The elevator should only sell the grain upon receiving explicit instructions from the charity itself. While elevator grain is the easiest to transfer via storage receipts, farm-stored grain can be donated too. It just requires more care because you must physically segregate the donated grain and document the transfer with a written bill of sale.
Additionally, you must avoid “round-trip” transactions where the charity sells the grain back to you. If you need grain for your operation, you should buy it from an independent seller and let the charity sell the donated grain to an independent buyer.
It is also vital to complete your Farm Service Agency (FSA) bushel certification in your name before transferring any grain. With the OBBBA’s updated farm program payments and base-acre rules, protecting your production history is more critical than ever.
Special Perks for Produce and Food Donors
If you raise wholesome food—such as vegetables, fruit, dairy, or eggs—and donate to a qualifying charity serving the hungry, ill, or infants, the OBBBA offers a new tax benefit. You can claim an itemized deduction equal to half the fair market value of the crop, even if your tax basis in that grown crop is zero. While the new 0.5% of AGI floor still applies to this strategy, a substantial produce donation may surpass that floor. The charity needs to provide the donor with a written statement stating how the food will be used. No formal appraisal is required.
Important Exception: Active Farmers Only
This strategy is highly effective, but it only works for active farmers who raise the crops themselves. Landlords who rent their land to a tenant and receive a share of the crop as rent will not receive the same benefit as an active farmer if they donate those bushers. The IRS treats crop-share rent as income already earned, meaning the donation won’t qualify for the same tax-free treatment.
Let’s Plan Your Next Move
The gap between the value of cash donations and grain donations has never been wider. If you regularly give to your church, a local food bank, or any qualified charity, this repeatable strategy can benefit your operation. Before you move grain, reach out to your local tax advisor at LattaHarris to help you navigate through this strategy. The timeline and structural requirements need to be properly met to ensure your generosity works harder for both the charity and you.