New Charitable Giving Rules Take Effect in 2026

The One Big Beautiful Bill Act (OBBBA), signed into law this past July, introduces significant changes to charitable giving tax benefits, all of which take effect in 2026. While these changes don’t eliminate the benefits of charitable giving, they do reduce them, thereby requiring more strategic planning to maximize both your philanthropic impact and tax efficiency. Here’s what you need to know, and more importantly, what you can do about it right now.

Three Key Changes Starting in 2026:

$1,000 Deduction for Standard Deduction Filers: Non-itemizers will be able to deduct up to $1,000 (single) or $2,000 (married filing jointly) in charitable cash contributions. While this is certainly an increased benefit, it doesn’t apply to anyone filing an itemized tax return, therefore limiting its usefulness, particularly for those in high-tax states such as California.

0.5% AGI Floor for All Itemizers: For any taxpayers currently filing an itemized tax return, your future charitable deductions will only count for amounts exceeding 0.5% of your adjusted gross income (AGI). For example, if you have $200,000 in AGI, you must give more than $1,000 before receiving any tax benefit on the next dollar. In other words, only amounts above this 0.5% threshold will be considered deductible.

35% Cap for High Earners: For those in the 37% tax bracket, your itemized deductions will be capped at a 35% tax benefit instead of the full 37%. This effectively reduces the tax incentive for charitable giving among higher earners

Key Takeaway for 2025 Planning

All three changes take effect in 2026, creating a narrow but powerful opportunity to maximize your current tax benefits this year. One possible solution may be through the use of Donor-Advised Funds (DAFs), as they allow for strategic bunching of your charitable gifts. These are particularly best funded through the use of low-basis stock, as they receive the added benefit of avoiding capital gains taxes as well.

Through the use of DAFs and contributing multiple years’ worth of gifts in 2025, you can:

• Claim the full charitable deduction under today’s more favorable rules
• Avoid the 0.5% AGI floor that begins in 2026
• High earners can capture the full 37% deduction before the cap takes effect
• Maintain complete flexibility to direct grants to your favorite charities over multiple years

As your financial advisors, our role is to help you navigate these changes while staying focused on what matters most: supporting the causes you care about. The new rules don’t change the importance of charitable giving, but they do reward those who plan strategically.

If you have questions about how these changes might impact your giving strategy, or want to discuss setting up a donor-advised fund before year-end, please feel free to reach out. We’re here to help ensure your charitable giving remains both personally meaningful and tax-efficient in the years ahead.

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