The passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 has significantly reshaped the tax landscape for charitable giving. As we enter the 2026 tax year, donors must navigate a combination of expanded incentives for small donors and new “floors” that complicate deductions for high earners and corporations.
Here is how you should plan your 2026 charitable contributions:
1. Non-Itemizers: The New “Universal” Deduction
For the roughly 90% of taxpayers who claim the standard deduction, the OBBBA restores and expands the “above-the-line” charitable deduction.
- The Benefit: You can now deduct up to $1,000 (single) or $2,000 (married filing jointly) even if you don’t itemize.
- Requirements: Contributions must be made in cash (or cash equivalents) to public charities.
- Exclusions: Donations to Donor-Advised Funds (DAFs), supporting organizations, or private foundations do not qualify for this specific non-itemizer deduction.
2. Itemizers: Navigating the 0.5% “Floor”
If you itemize your deductions, the 2026 rules introduce a hurdle designed to offset the cost of the universal deduction.
- The 0.5% AGI Floor: You can only deduct charitable contributions that exceed 0.5% of your Adjusted Gross Income (AGI).
- Example: If your AGI is $200,000, your first $1,000 in donations provides no tax benefit.
- Top Bracket Cap: Taxpayers in the 37% bracket will see the value of their charitable deduction capped at 35%.
- The “SALT” Silver Lining: The OBBBA increased the State and Local Tax (SALT) deduction limit to $40,000 (up from $10,000), which may make itemizing more attractive for many homeowners than it was in previous years.
3. Retirees (Age 70½+): The QCD Advantage
Qualified Charitable Distributions (QCDs) are the “winning strategy” for 2026, especially as they bypass the new 0.5% floor entirely.
- How it Works: You can transfer up to $111,000 directly from your IRA to a charity. This amount is excluded from your AGI, lowering your overall tax profile.
- New Reporting: Starting in 2026, IRA custodians will use Code Y in Box 7 of Form 1099-R to explicitly label these as QCDs, making it easier to track on your return.
- One-Time Provision: You can make a one-time QCD of up to $55,000 to a Charitable Remainder Trust or a Charitable Gift Annuity.
4. Corporations: The 1% Floor
Businesses also face new restrictions under the OBBBA.
- The 1% Floor: Corporations can only deduct charitable gifts that exceed 1% of their taxable income.
- The Ceiling: The maximum deduction remains capped at 10% of taxable income.
- Carryforwards: Unused deductions exceeding the 10% cap can be carried forward for five years, but contributions that fail to clear the 1% floor are generally lost unless the 10% ceiling is hit in a future year.
5. Education Incentives: The Scholarship Credit
Starting in 2026, a new federal non-refundable tax credit is available for contributions to state-certified Scholarship Granting Organizations (SGOs).
- Limit: Up to $1,700 per taxpayer.
- Impact: This is a dollar-for-dollar reduction of your tax bill, making it one of the most powerful giving incentives in the new law.
| Strategy | Best For | 2026 Status (OBBBA) |
|---|---|---|
| Cash Gifts | Everyone | $1k/$2k for non-itemizers; subject to 0.5% floor for itemizers. |
| Appreciated Stock | High Earners | FMV deduction + no capital gains tax. Still subject to 0.5% floor. |
| “Bunching” | Itemizers | Consolidate 2 years of gifts into 1 to clear the 0.5% floor. |
| QCDs | Ages 70½+ | Gold Standard. Bypasses the 0.5% floor and reduces AGI. |
| SGO Credit | K-12 Supporters | New. $1,700 credit for certified state programs. |
Summary: Navigating a More Complex Landscape
As the rules for charitable contributions continue to multiply—with new deduction “floors,” income caps, and specific eligibility requirements—charitable giving in 2026 has shifted from a simple line item to a strategic financial decision. Beyond the federal changes, evolving state-level tax impacts further complicate the math for many donors.
Given these layers of complexity, it is highly beneficial to consult with a tax expert. Professional guidance can help you navigate the “perfect storm” of the 0.5% AGI floor and the 35% deduction cap to ensure your generosity still provides maximum tax relief.
A tax expert can also assist with more sophisticated, long-term strategies, including:
Charitable Remainder Trusts (CRTs): Securing a lifetime income stream for yourself while ensuring the remaining assets support a cause you love.
Charitable Bequests: Designing a legacy that reduces the size of your taxable estate.
Retirement Account Beneficiaries: Naming charities as beneficiaries of IRAs or 401(k)s to avoid the heavy “double taxation” (income and estate tax) that heirs would otherwise face.
Charitable Lead Trusts (CLTs): Providing immediate income to a charity while ultimately passing assets back to your family with reduced gift taxes.
