Starting January 1, 2026, several federal tax law changes will affect how individual donors can deduct charitable contributions.
Whether you itemize or take the standard deduction, these new federal tax rules will affect how your donations are treated, potentially changing when, how, and how much you give. From a brand-new deduction for non-itemizers to updated limits for high earners, understanding what’s ahead can help you make the most of your generosity.
Here’s a breakdown of what’s changing and what you should consider before and after the new rules take effect.
1. New Above-the-Line Deduction for Non-Itemizers
Starting in 2026, a new federal tax rule will allow taxpayers who take the standard deduction to claim a tax deduction for charitable giving. This hasn’t been available in a few years, and even when it was available was much more modest.
If you don’t itemize your taxes, you’ll now be able to deduct up to:
- $1,000 in cash donations (for individuals)
- $2,000 in cash donations (for married couples filing jointly)
This is known as an above-the-line deduction, meaning this deduction applies in addition to the standard deduction. It’s designed to give everyday donors a meaningful incentive to give back.
According to the IRS, about 87% of U.S. taxpayers take the standard deduction and currently receive no tax benefit for their charitable giving. This change opens the door for millions of Americans to deduct up to $1,000–$2,000 of giving annually, even if they don’t itemize.
Who Qualifies for the Above the Line Charitable Deduction and What Gifts Count?
This deduction is only available for cash gifts made directly to 501(c)(3) public charities. The IRS places clear limits on what qualifies:
- Qualifies: Cash donations to nonprofits that have active 501(c)(3) public-charity status
- Does NOT qualify: Contributions to donor-advised funds (DAFs), private foundations, or supporting organizations
For example:
- Writing a check to your local food bank or making an online donation to a hospital foundation? Eligible.
- Transferring money to your DAF or private family foundation? Not eligible under this rule.
2. New 0.5% AGI Floor for Itemized Charitable Deductions
Beginning in 2026, taxpayers who itemize will face a small change in how charitable deductions are calculated. Under the new law, you can only deduct the portion of your charitable contributions that exceeds 0.5% of your adjusted gross income (AGI).
This 0.5% threshold functions like a floor. You must clear it before any of your donations count for a tax deduction.
How the 0.5% Floor Works
Here’s what that looks like in practice:
- If your AGI is $300,000, the first $1,500 (300,000 X 0.5%) of charitable giving will not be deductible. Only donations above that amount will count.
- If your AGI is $100,000, the first $500 (100,000 X 0.5%) of your giving won’t count toward a deduction.
This change slightly reduces the overall deduction for itemizers, particularly for those who give smaller amounts in relation to their income.
What the New AGI Floor Changes
For most households, the new 0.5% floor will have a relatively minor impact. But it could influence giving strategies, especially for donors who want to maximize the tax benefit of their gifts.
One potential strategy: bunching donations. Instead of giving small amounts every year, some donors may choose to give larger gifts in fewer years, so their donations clear the 0.5% floor and qualify for a deduction.
This change may not affect how much you give, but it could affect when you choose to give if you’re aiming to optimize your tax outcome.
3. Charitable Deduction Benefits Capped at 35% for High Earners
Starting in 2026, taxpayers in the highest federal income tax bracket will see a slight reduction in the tax benefit they receive from charitable giving. Under the new rule, charitable deductions for these high earners will be capped at 35%, even though their top marginal tax rate is currently 37%.
In practical terms, that means each dollar donated will reduce taxes by 35 cents, not 37 cents.
Who Is Affected by the Cap on Charitable Deductions?
This cap applies only to those in the top federal income tax bracket, which typically includes the top 1% of earners. If you’re not in that income tier, this change won’t affect your charitable deductions at all.
But for ultra-high-income donors making large gifts, this is a modest but notable adjustment to how the tax code treats their philanthropy. The reduced deduction may influence the timing of giving for these individuals.
A major gift made in 2025 (before the cap takes effect) offers slightly more tax savings per dollar than the same gift made in 2026. While the difference is small, high earners considering a significant donation may want to factor this into year-end planning.
Charitable giving is often driven by mission, not just tax math, but this change narrows the benefit at the margins for those in the top tier.
4. The Permanent 60% of AGI Limit for Cash Gifts
Historically, the deduction limit for cash gifts was 50% of AGI, but a temporary measure raised it to 60%. That higher limit was set to expire after 2025. Now, under the new tax law, the 60% AGI limit has been made permanent.
Who Should Care About the Extended AGI Limit
This is especially beneficial for donors who plan to give a large portion of their income to charity in a single year, such as when selling a business, receiving a windfall, or planning a legacy gift.
For example, if your AGI is $100,000, you can give up to $60,000 in cash to qualified charities and potentially deduct the full amount that same year.
By making the 60% limit permanent, the new law gives philanthropically minded individuals greater flexibility and clarity in their planning.
What to Consider Before the End of 2025
With several tax changes taking effect in 2026, year-end planning in 2025 could make a meaningful difference, especially for those who itemize, plan large gifts, or fall into higher tax brackets.
1. Lock in 2025 Deductions
If you're planning a significant charitable gift and you itemize deductions, consider finalizing those contributions by December 31, 2025. Under current law, all qualified donations are fully deductible without the new 0.5% AGI floor, and the deduction value is calculated using today's tax brackets.
2. Use Strategic Bunching
Taxpayers who alternate between itemizing and taking the standard deduction may benefit from bunching charitable gifts in 2025. By concentrating multiple years’ worth of giving into a single year, you may exceed the standard deduction threshold and fully deduct your contributions now, before the new floor limits take effect.
3. Evaluate Timing if You’re in a High Tax Bracket
For taxpayers in the top marginal bracket, the value of each charitable deduction decreases slightly under the 2026 rules. While this change may not drive major shifts in giving, it could tip the scale if you're planning a large contribution. Making those gifts in 2025 allows you to take full advantage of the current 37% rate rather than the upcoming 35% cap.
Planning Your Charitable Giving in 2026 and Beyond
Make the Most of the New Deduction for Non-Itemizers
If you typically take the standard deduction, 2026 introduces a new opportunity to claim a tax benefit for your charitable giving. To receive the full above-the-line deduction, plan to donate at least:
- $1,000 if filing individually
- $2,000 if filing jointly
To qualify, these must be cash contributions made directly to public charities. Gifts to donor-advised funds or private foundations do not count under this provision. This deduction offers a simple way to reduce your taxable income while supporting causes you care about.
Adjust Giving Strategies Around the 0.5% Floor
For those who continue to itemize deductions, keep the new 0.5% AGI floor in mind. While the impact may be minimal for large donors, it can affect those whose charitable giving is closer to that threshold.
One way to maximize deductions is through gift bunching, or consolidating multiple years of giving into a single tax year. This strategy allows more of your donations to exceed the floor, increasing the portion that qualifies for a deduction. In off-years, you can take the standard deduction without losing tax efficiency.
Monitor Annual IRS Updates
Federal deduction thresholds and tax brackets adjust annually for inflation, and the IRS provides updated guidance each year. Keeping up with these changes, including the standard deduction amount and the income cutoff for the top tax bracket, will help you tailor your giving to match the current rules.
By staying informed and planning ahead, you can ensure your generosity continues to align with both your values and your financial goals.
Disclaimer: This commentary is for informational and educational purposes only. This information is not intended to provide, and should not be relied on for, tax advice. Please consult your tax advisor regarding your specific situation. Opinions are subject to change.
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