Why 2026 Could Be A Good Year For Planned Charitable Giving

Charitable giving will feel different for many taxpayers starting in 2026, following major changes introduced by the One Big Beautiful Bill Act (OBBBA), signed into law last July. While the legislation expands tax benefits for some donors, it also introduces new limits that could reduce the value of deductions for others. Understanding these changes now can help donors plan more strategically.

How Charitable Deductions Worked Before

For more than a century, charitable deductions have generally been available only to taxpayers who itemize. Even before recent tax reforms, that excluded a large share of households. After the 2017 tax law significantly increased the standard deduction, the number of taxpayers who itemize fell sharply—from roughly one-fifth of households to fewer than one in ten today.

That shift had real consequences for philanthropy. According to the Tax Policy Center, the percentage of households claiming charitable deductions dropped by more than half, with middle-income filers seeing the steepest decline.

OBBBA further increased the standard deduction beginning in 2025, with additional inflation-adjusted increases scheduled for 2026. While that’s good news for many taxpayers, it raised concerns about whether charitable giving would fall even further.

A New Deduction for Non-Itemizers

To address those concerns, Congress created a new charitable deduction for taxpayers who take the standard deduction. Starting in 2026, non-itemizers may deduct up to $1,000 in charitable gifts if filing single, or $2,000 if married filing jointly.

There are limits, however. Only cash donations qualify, and they must be made to eligible public charities. Contributions to donor-advised funds or private foundations do not count for this deduction.

New Limits for Itemized Charitable Deductions

Taxpayers who itemize will face tighter rules beginning in 2026. A new floor applies: only the portion of charitable contributions that exceeds 0.5% of adjusted gross income (AGI) will be deductible.

For example, a donor with $100,000 in AGI who gives $5,000 to charity would only be able to deduct $4,500—the first $500 would not qualify. While existing percentage caps remain in place (such as the 60% AGI limit for cash gifts to public charities), this new threshold effectively reduces the value of deductions relative to income.

Changes for Corporate Donors

Corporations will also encounter new restrictions. Beginning in 2026, a company must contribute more than 1% of its taxable income before any charitable gifts become deductible. The long-standing 10% ceiling on corporate charitable deductions remains unchanged, with excess amounts still eligible for carryforward.

Reduced Benefits for Top-Bracket Donors

High-income taxpayers will see a cap on the value of itemized deductions. While the top federal income tax rate remains 37%, the tax benefit of charitable deductions for those in that bracket will effectively be limited to 35%.

In practical terms, a $10,000 charitable gift that once produced $3,700 in tax savings will now generate $3,500. This new limitation echoes earlier rules that restricted deductions for high earners before being repealed in 2017.

Estate Planning and Charitable Giving

OBBBA also increased the federal estate tax exemption to $15 million per individual, or $30 million for married couples. Because charitable gifts are exempt from estate tax, philanthropy can remain a powerful tool for high-net-worth individuals looking to reduce estate tax exposure while supporting charitable causes.

Retirement Accounts and Charitable Strategies

Older taxpayers with traditional IRAs continue to have access to qualified charitable distributions (QCDs). These allow donors age 70½ and older to transfer funds directly from an IRA to a charity, satisfying required minimum distributions without increasing taxable income.

The annual QCD limit rises to $111,000 in 2026. In addition, SECURE 2.0 allows a one-time QCD to certain split-interest entities, with that limit also increasing for inflation.

Planning Moves to Consider Now

With new rules on the horizon, timing and structure matter more than ever:

• Accelerating gifts into 2025 may help high-income donors preserve the full value of current deductions.

• Bunching contributions into a single year can help itemizers overcome the new AGI floor.

• Strategic bunching for non-itemizers may push a donor into itemizing for a year, unlocking larger deductions.

• Donor-advised funds can still be useful for donors who want immediate deductions while deciding how and when to distribute gifts—though itemizing is required.

Choosing the Right Assets to Give

Non-itemizers seeking deductions should focus on cash gifts to public charities. Itemizers may benefit more by donating appreciated assets, such as long-held stocks, which can generate a charitable deduction while avoiding capital gains taxes.

With multiple changes taking effect in 2026, charitable giving strategies deserve a fresh look. The new law affects who can deduct gifts, how much is deductible, and how valuable those deductions really are. Donors—especially high earners, retirees, and those planning significant gifts—should review their options carefully and consult a tax advisor to ensure their giving aligns with both their philanthropic goals and the new tax landscape.

Source: Forbes