New Charitable Giving Tax Rules Coming In 2026: What Donors Should Know

If you regularly donate to charity, get ready—new tax rules set to take effect in 2026 could increase, decrease, or complicate your deductions depending on your situation.

These changes come from the One Big Beautiful Bill Act and are permanent unless Congress decides otherwise.

A Quick Look Back

The 2017 tax law nearly doubled the standard deduction and capped state and local tax (SALT) deductions at $10,000. As a result, millions of taxpayers stopped itemizing deductions, which meant they no longer received tax breaks for charitable donations. Between 2017 and 2019, itemized charitable deductions dropped by $66 billion (26%), according to Giving USA and Indiana University.

What’s Changing in 2026?

The new law introduces three major changes for charitable deductions:

1. New Deduction for Non-Itemizers

Starting in 2026, taxpayers who don’t itemize can still deduct up to:

• $2,000 per year for married couples filing jointly
• $1,000 for single filers

Requirements:

• Must be cash gifts to qualified charities (e.g., churches, schools)
• No deductions for donated property, stocks, or gifts to donor-advised funds
• This deduction reduces taxable income—but not AGI, which impacts things like Medicare premiums and Roth IRA limits

Impact:

Roughly 100 million taxpayers who currently can’t deduct charitable donations will now be eligible for some tax benefit.

2. 0.5% AGI Disallowance for Itemizers

If you do itemize, you’ll lose a portion of your charitable deduction equal to 0.5% of your adjusted gross income (AGI).

Example:

A couple with $225,000 AGI who donates $2,000 will lose $1,125 of their deduction—over half. But if they give $5,000, they lose the same $1,125, meaning a smaller percentage of the deduction is disallowed.

Planning Tip:

Consider bunching donations—making larger gifts every few years instead of annual smaller ones—to maximize the benefit.

3. Cap on Deduction Rate for Top Earners

Top-bracket taxpayers (currently $752,000+ for joint filers) will only get charitable deductions at 35%, not the top 37% tax rate.

Combined Effect Example:

A couple earning $900,000 who donates $100,000 would save $37,000 in taxes under today’s rules. In 2026, their savings drop to about $33,425—$3,575 less—because of both the 0.5% disallowance and the rate cap.

Strategy:

High earners might want to accelerate donations into 2025, possibly using donor-advised funds (DAFs) to lock in full deductions now and distribute the funds later.

Additional Tips for Donors

QCDs (Qualified Charitable Distributions) from traditional IRAs remain unaffected by the new rules and are a highly tax-efficient option for those age 70½ or older.

Those benefiting from expanded SALT deductions in 2025 might want to make non-cash donations (like clothes or furniture) before 2026, when they may no longer itemize.

Bottom Line

The new rules create both opportunities and challenges for charitable donors. Tax professionals are advising clients to act now—especially high-income earners looking to maximize deductions before 2026.

As tax attorney Lawrence Katzenstein puts it: “People need to decide whether to accelerate contributions into this year, make them on a normal schedule, or defer them into next year.”

If you want to get the most out of your charitable giving, now is the time to start planning.

 

Source: msn