Effective January 1, 2026, the One Big Beautiful Bill Act (OBBBA) reshapes how individuals deduct charitable contributions. Several changes are favorable for broad participation, while others trim deductions for higher-income households. Planning before year–end 2025 can significantly improve outcomes.
What’s Changing in 2026
- Universal (above-the-line) charitable deduction for non-itemizer
Beginning in 2026, taxpayers who take the standard deduction can claim up to $1,000 (single) or $2,000 (married filing joint) for cash gifts made directly to public charities such as qualified nonprofits, schools, and churches. Contributions to donor advised funds, private foundations, and supporting organizations do not qualify for this new deduction.
- New “floor” for itemizers: 0.5% of Adjusted Gross Income (AGI)
Itemizers may deduct only the portion of annual charitable gifts that exceed 0.5% of AGI. For example, a taxpayer with an AGI of $1,000,000, the first $5,000 of charitable contributions are not deductible.
- Overall haircut returns for high-income taxpayers
A Pease-like limitation reduces total itemized deductions for upper-income taxpayers, effectively capping the tax value of deductions for taxpayers in the 37% tax bracket at about $0.35 per dollar in 2026.
- 60% of AGI limit for cash gifts is preserved
The 60% ceiling for cash to public charities continues beyond 2025. Five-year carryforwards remain available for unused deductions.
- Donor Advised Fund nuance
Contributions to donor advised funds (DAFs) continue to qualify for itemized deductions under the regular rules, but do not qualify for the new non-itemizer deduction beginning in 2026.
- Qualified Charitable Distributions (QCDs) are unchanged and more powerful
For IRA owners 70 ½ or older, QCDs still exclude up to the annual limit from income (indexed – $108,000 for 2025), bypassing both the 0.5% floor and high-income haircut in 2026.
Year-End 2025: How to Maximize Charitable Tax Benefits Now
1. Bunch gifts into 2025
If you already give to a charity annually, consider front-loading charitable contributions into 2025 to avoid the 0.5% AGI floor and the 2026 haircut.
2. Donate appreciated assets instead of cash
Contribute long-term appreciated securities directly to a charity or donor advised fund for a double benefit, deduct the fair market value (subject to AGI limits) and avoid capital gains tax.
3. High-income households: accelerate large gifts into 2025
If you’ll be in the highest tax bracket, a 2025 gift often yields a larger after-tax benefit per dollar than the same gift made in 2026.
4. IRA owners 70 ½ years or older: execute QCDs by December 31, 2025
QCDs can satisfy required minimum distributions and reduce AGI.
5. Be mindful of AGI ceilings and carryforwards
If 2025 gifts exceed your AGI limits (60% for cash donations and 30% for appreciated property), the five-year carryforward still applies. Coordinate with expected 2026 and later income since carryforwards you claim in future years will face the new floor and haircut rules.
6. Substantiation and appraisals
For non-cash donations greater than $5,000 (including closely held interests), arrange qualified appraisals and contemporaneous receipts – especially if closing transactions before year-end.
Bottom Line
The 2026 rules introduce a modest new deduction for non-itemizers and tightens the math for itemizers – especially taxpayers at higher incomes. For many taxpayers, 2025 will be the most favorable year to make significant gifts and lock in current deduction rules.
Disclosure: This article is for informational purposes only and is not personalized tax advice.
