Charitable giving will look different for many donors in 2026. The One Big Beautiful Bill Act (OBBBA) signed in July significantly changed the tax rules for charitable gifts, making it likely that more taxpayers can benefit, but imposing new limits on others. Here’s what you need to know.
Who Benefitted From The Charitable Deduction Rules Before The Change?
Since the charitable deduction was created in 1917, taxpayers have had to itemize their deductions to claim it (and that’s still the case for the 2025 tax year—you’ll use Schedule A). That means that taxpayers who did not itemize—about seven in ten taxpayers in the 2016 tax year—didn’t get a tax break. When the tax laws changed in 2017, boosting the standard deduction, the number of taxpayers who itemized dropped even further. Now, fewer than one in ten taxpayers itemize their deductions.
What has been the impact on charitable giving? The Tax Policy Center estimates that the law cut the share of households itemizing their charitable contributions by more than half, from 21% to about 9%. The share of middle-income households claiming the charitable deduction dropped by two-thirds, from roughly 17% to just 5.5%.
The standard deduction got another boost in 2025, thanks to OBBBA. In 2025, the standard deduction was retroactively increased to $15,750 for single taxpayers and married individuals filing separately, $31,500 for married couples filing jointly, and $23,625 for heads of household. (In 2026, the standard deduction will increase to $16,100 for individuals and married couples filing separately, to $32,200 for married couples filing jointly, and to $ 24,150 for heads of household.)
Charitable Giving For Taxpayers Who Do Not Itemize
This time, however, Congress has an answer for charitable organizations that worried the increase might lead to another drop in charitable gifts: a new deduction for taxpayers who do not itemize. Beginning in 2026, taxpayers who claim the standard deduction can claim a deduction for charitable giving of up to $1,000 for single filers and up to $2,000 for married couples filing jointly.
There are some restrictions. Donations must be cash contributions to qualified public charities—this means no gifts to donor-advised funds or private foundations (you can read more on private foundations here).
New Floor And Limits For Itemized Deductions
Taxpayers who itemize aren’t so lucky. OBBBA limits those deductions beginning in 2026 by adding a floor—only the portion of your charitable contributions that exceeds 0.5% of your Adjusted Gross Income (AGI) is deductible.
Here’s what the math looks like. Let’s say your AGI is $100,000, you itemize your deductions, and your gifts totaled $5,000. The floor limits your deduction to $4,500, since the first $500 (.5% of $100,000) won’t count. This floor effectively reduces the deduction relative to income.
The regular charitable deduction rules otherwise remain in place. That means, for example, that cash gifts to public charities are deductible up to 60% of your AGI. Long-term appreciated assets like stock are generally deductible up to 30% of your AGI. If you give more, all is not lost since excess amounts may be carried forward up to five years.
What About Corporate Giving?
There’s a new floor for corporate donors as well. Starting in 2026, corporations will be required to contribute at least 1% of their taxable income before their charitable gifts can qualify for a deduction—previously, there was no minimum. This means that the first 1% of a corporation’s taxable income donated to charity does not generate a tax deduction.
The rule limiting corporate charitable deductions to 10% of taxable income still applies (gifts that exceed the 10% ceiling can be carried forward for up to five years). That means that only contributions that exceed the 1% floor and do not exceed the 10% ceiling are deductible in the current year.
Cap On Deduction Benefits For High-Income Donors
Donors in the top federal tax bracket (37%) will also find that the tax benefit of a charitable donation will be limited to 35% in 2026. This reduces the effective tax savings per dollar donated.
The reason? A change in the way that high-income taxpayers benefit from itemized deductions under OBBBA. Before 2017, the Pease limitations reduced how much taxpayers at the top could effectively deduct. The Tax Cuts and Jobs Act eliminated the Pease limitations but OBBBA introduced a new, similar cap for taxpayers in the top bracket. A new formula now effectively limits the tax benefit of itemized deductions for those in the 37% tax bracket to 35%. (For 2026, that top bracket kicks in at $640,601 for singles and $768,701 for married couples filing jointly.)
What does that look like? Typically, the value of the donation for tax purposes is equal to the donation multiplied by your tax rate. But with the new haircut, the math looks a little different at the top. If you’re in the highest bracket and give $10,000, your deduction is “worth” $3,500 for tax purposes instead of $3,700.
What About High Net Worth Donors?
The federal estate tax exemption also remains in place, but at a higher amount. Under OBBBA, the federal estate tax exemption increased to $15 million per individual (or $30 million per couple). Charitable donations are exempt from federal estate tax, so a taxpayer with an estate worth $17 million could leave $2 million to charity and his estate would pay no federal estate tax (otherwise, a whopping $745,800 would go to Uncle Sam).
What About Taxpayers With Retirement Accounts?
Taxpayers who have socked away assets in retirement plans have options, too. A qualified charitable distribution (QCD) allows donors age 70½ and older who own a traditional IRA to roll funds directly from an IRA to a qualified charity. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year, and the amount donated is excluded from your taxable income—you won’t even have to itemize to do it. The total amount of QCDs that you can exclude from your gross income increased to $108,000 in 2025 and is increasing to $111,000 in 2026.
(Roth IRAs won’t qualify for a QCD, but high-income donors with large traditional IRAs could consider converting a traditional IRA to Roth and using the charitable deductions to offset the income from conversion.)
Additionally, as part of SECURE 2.0, you can make a one-time election to donate a QCD to a split-interest entity like a charitable trust. The initial limit was $50,000, but it is adjusted for inflation to $54,000 in 2025 and will be $55,000 in 2026. Combining a QCD with a split-interest entity can provide multiple benefits, including a tax break for the donor and a stream of predictable income for non-charitable beneficiaries (like spouses or children).
What Should You Be Thinking About Now?
With changes around the corner, timing matters more than ever.
Donors in high tax brackets should consider front-loading gifts at the end of 2025 to lock in the full 37% deduction value before the cap takes effect. But don’t give too much if you’re chasing a deduction: any excess amount rolled over to 2026 will be subject to the 35% cap.
You may also want to consider “bunching” multiple years of gifts into one tax year to optimize your deduction. Because of the 0.5% AGI floor for itemizers, grouping charitable gifts into a single tax year can result in a larger deductible amount above the floor.
Those who don’t regularly itemize can take advantage of bunching, too. If you’ve been thinking about a large gift—above the $1,000 limit for the new deduction for non-itemizers—consider making a larger gift in one year and skipping a year or two. The gift would need to be big enough to push you into itemizing. For example, if you want to give $6,000 per year to your alma mater for three consecutive years, consider making a donation of $18,000 in a single year. Your total outlay is the same but instead of being limited to $1,000 for each of three years (for a total deduction of $3,000), you can claim the entire $18,000 as a deduction in one year (subject to the floor, of course).
If you want to make a gift now to avoid income and floor limitations, but you’re not sure which charity to support, consider a donor-advised fund, or DAF. A DAF is an account established at a public charity. Donating to a donor-advised fund typically makes you eligible for an immediate tax deduction, even if the funds aren’t immediately turned over to charity. The funds in a DAF are invested, and you can make grant recommendations to any qualified public charity, dribbling the money out over time. Remember that you must itemize to benefit from donating to a DAF.
What Kinds Of Gifts Should You Make?
If you’re hoping to get a charitable deduction and you do not itemize, donate cash (but remember that you must donate to a public charity and not a private foundation or donor-advised fund).
If you do itemize your deductions, consider donating appreciated stocks or other long-term assets. You’ll get the benefit of the charitable deduction at the fair market value of the assets while avoiding capital gains tax, a win-win.
Still Have Questions?
With so many changes coming, it’s important to stay on top of IRS rules and guidance. The new law can impact everything from how much of your gifts are deductible to whether they’re deductible at all. And for itemizers and seniors, you’ll want to consider the best way to use retirement accounts or plan larger contributions to maximize the benefits. If you have questions, reach out to your tax advisor.
Read the full article here