For many taxpayers, charitable giving is more than goodwill, it’s a key part of their annual tax plan. But beginning January 1, 2026, the One Big Beautiful Bill Act (OBBBA) reshapes the rules in ways that affect nearly every donor. Some taxpayers will see new opportunities, while others may experience reduced tax benefits for the first time in decades.

 

With 2025 being the final year before the new rules take effect, now is the time to understand how these changes may influence your charitable giving strategy.

 

A new deduction for nonitemizers begins in 2026

 

One of the most significant changes coming in 2026 is a new universal charitable deduction for individuals who take the standard deduction. For years, non-itemizers received no tax benefit for charitable contributions. That changes on January 1, 2026, when:

• Single filers can deduct up to $1,000
• Married couples filing jointly can deduct up to $2,000

 

These deductions apply to cash contributions to qualified charities.

 

This means that small, routine gifts, whether made to local nonprofits, churches, or community organizations, may now reduce taxable income even if you do not itemize. Families who make modest but consistent donations will benefit the most.

 

What to do: Starting in 2026, be sure to track all charitable gifts throughout the year. Those $25 and $50 contributions will matter at tax time.

 

A new 0.5% AGI floor for itemized charitable deductions

 

For taxpayers who do itemize, the rules move in the opposite direction.

 

Beginning in 2026, charitable contributions will only be deductible to the extent they exceed 0.5% of your adjusted gross income (AGI). If your AGI is $250,000, the first $1,250 of charitable donations will not be deductible.

 

This type of floor hasn’t existed for charitable contributions before. Think of it as similar to the medical expense threshold, only smaller. Even so, it affects donors whose giving lands close to that threshold and reduces the overall value of itemizing for many individuals.

 

Why it matters: Many taxpayers who have always itemized charitable contributions may find that they no longer receive a full benefit unless they significantly increase their giving or use a planning strategy such as “charitable bunching.”

 

A new deduction ceiling for high-income taxpayers

 

High-income taxpayers face an additional limitation starting in 2026. Anyone in the 37% federal tax bracket will have the value of all itemized deductions, including charitable contributions, capped at a 35% benefit.

 

This means that even if you are in the highest tax bracket, your deductions cannot reduce your taxes at that 37% rate.

 

Combined with the new 0.5% AGI floor, this change reduces the overall tax value of charitable giving for higher earners. For example:

• In 2025, a $100,000 charitable donation for a high-income taxpayer could generate a $37,000 tax benefit.
• In 2026, that benefit may fall to around $33,250, due to both the AGI floor and the 35% deduction cap.

 

That is nearly a 10% reduction for the same donation.

 

Who is affected: Taxpayers with significant itemized deductions, those expecting higher income in 2026, or those planning large philanthropic gifts.

 

The 60% AGI limit on cash gifts becomes permanent

 

Not all the 2026 changes are restrictive. Under OBBBA, the 60% AGI limitation for cash gifts to public charities (originally temporary under the Tax Cuts and Jobs Act) becomes permanent. This means donors can continue making larger allowable cash contributions without worrying about a return to the previous 50% limit.

 

Why 2025 is so important

 

2025 is the final year before these new rules take effect. For many taxpayers, this last “pre-change” year offers the most favorable conditions for maximizing charitable deductions. If you anticipate significant giving in the next few years, it may make sense to consider accelerating contributions into 2025.

 

Key reasons to plan now:

• There is no AGI floor on charitable contributions in 2025.
• High-income taxpayers can still receive the full 37% tax benefit on itemized deductions in 2025.
• Large or one-time charitable gifts may be more valuable if made before the 2026 limitations begin.

 

Planning strategies to navigate the 2026 rules

 

The coming changes don’t eliminate charitable giving benefits, they simply require more intentional planning. A few strategies may help preserve or enhance the tax impact of your donations:

 

1. Consider a Donor-Advised Fund (DAF) in 2025

 

A donor-advised fund allows you to make a large charitable contribution this year, receive the 2025 deduction, and distribute grants to charities over time. This can help lock in the more favorable 2025 rules even if your intended charities receive the funds gradually in later years.

 

2. Charitable Bunching

 

“Bunching” refers to consolidating multiple years of charitable gifts into a single year so you can exceed the standard deduction and itemize. Bunching in 2025 may help avoid the new 2026 AGI floor, though some moderate-income taxpayers may find bunching in 2026 beneficial depending on their tax profile.

 

3. Qualified Charitable Distributions (QCDs)

 

For taxpayers age 70½ or older, QCDs remain one of the most powerful tools for tax-efficient giving. Because QCDs come directly from your IRA and never hit taxable income, they circumvent the new 2026 rules entirely, no AGI floor, no deduction ceiling. These continue to be ideal for those with required minimum distributions (RMDs).

 

The 2026 changes to charitable giving represent the most significant shift in years, affecting nonitemizers and high-income taxpayers alike. With the new deduction floor, rate ceiling, and planning opportunities ahead, understanding the rules now ensures you can maximize the impact of your generosity while still managing your tax burden wisely. Plan your strategies now with your Faw Casson tax advisor.