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KEY CHANGES TO THE CHARITABLE DEDUCTION RULES
Starting in 2026, the primary changes to the charitable contribution deduction are the introduction of a new "floor" for itemized deductions, a cap on the tax benefit for top earners, and a new "above-the-line" deduction for non-itemizers.
For Itemizers
- Deduction Floor: Taxpayers who itemize can only deduct the portion of their total charitable contributions that exceeds 0.5% of their Adjusted Gross Income (AGI). For example, a taxpayer with a $200,000 AGI could only deduct contributions above the first $1,000.
- Deduction Value Cap (for high earners): For taxpayers in the highest federal income tax bracket (37%), the value of their itemized charitable deductions will be effectively capped at 35%. This means that for every dollar donated, the tax savings will be 35 cents, rather than 37 cents.
- AGI Limit is Permanent: The temporary rule allowing cash contributions to public charities to be deducted up to 60% of AGI has been made permanent, providing flexibility for large gifts.
For Non-Itemizers
- New Above-the-Line Deduction: Taxpayers who take the standard deduction will be eligible for a new, permanent above-the-line deduction for cash contributions made directly to qualified public charities.
- $1,000 for single filers.
- $2,000 for married couples filing jointly.
- This deduction does not apply to contributions made to donor-advised funds (DAFs) or private foundations.
For Corporations
- Deduction Floor: Corporations will also face a new floor, where only charitable contributions exceeding 1% of their taxable income will be deductible.
Planning Considerations
Due to these changes, many financial advisors suggest that itemizing donors consider accelerating planned 2026 charitable contributions into 2025 to maximize their tax benefits under the current, more favorable rules. Strategies like "bunching" multiple years of donations into a donor-advised fund in 2025 are also being recommended.
