Charitable Giving: 2026 Tax Changes and 2025 Planning Considerations

Our clients give to make an impact—and we help them give tax-smart. Two changes arriving for tax years beginning in 2026 will shrink the tax value of many itemized charitable gifts: a new 0.5% AGI floor and a 35% cap on the value of itemized deductions for top-bracket filers. For many affluent households, the same gift will deliver less tax benefit in 2026 than in 2025. 

If philanthropy is part of your plan, this is the moment to review strategy, consider front-loading 2025 gifts, and evaluate a donor-advised fund (DAF) to keep grants steady over time. 

What's Changing in 2026

1) New 0.5% AGI “floor” (itemizers):
Itemized charitable deductions will be reduced by 0.5% of AGI each year. Gifts under that floor aren’t deductible; amounts above it remain deductible (subject to existing AGI percentage limits by gift type). Example: with $300,000 AGI, the first $1,500 of giving produces no deduction.

2) 35% cap on the value of itemized deductions (top bracket):
For taxpayers in the top marginal bracket, the tax value of itemized deductions (including charitable gifts) will be capped at 35% beginning in 2026—effectively trimming the per-dollar tax benefit for high earners.

3) New non-itemizer deduction (cash gifts only):
Starting in 2026, households that don’t itemize can deduct up to $1,000 (single) or $2,000 (MFJ) of cash gifts to qualified public charities each year. This new deduction excludes DAFs and supporting organizations and does not reduce AGI (it reduces taxable income).

💡Why this matters: Many clients who itemize today (or sit in the top bracket) may see a smaller deduction for the same gift starting in 2026—unless they plan ahead.

A quick example

Couple filing jointly, $900,000 AGI, $100,000 gift

• 2025 rules: ~$37,000 tax savings (100,000 × 37%).
• 2026 rules: Subtract 0.5% floor ($4,500) ⇒ $95,500 deductible, then apply 35% cap ⇒ $33,425 savings.
  Net reduction: $3,575 vs. 2025.

Planning Moves to Consider Now

1) Front-load gifts in 2025 (bunching):
If you give annually, consider consolidating several years of gifts into 2025 to avoid the 0.5% floor and the 35% cap next year. A DAF lets you take the 2025 deduction now and grant over time. This is especially relevant for top-bracket filers.

2) Mind the new floor:
Smaller recurring gifts may lose value under the 0.5% AGI haircut. Strategically bunching into fewer, larger giving years can restore efficiency.

3) Use the new non-itemizer deduction where it fits:
For households that won’t itemize in 2026+, the $1,000/$2,000 cash deduction to qualified charities offers a modest, predictable benefit—but it excludes DAFs and doesn’t lower AGI.

4) QCDs remain powerful for IRA owners 70½+:
Qualified Charitable Distributions from IRAs bypass AGI entirely and aren’t subject to the new limits—often the most tax-efficient way to give for eligible clients.

5) Coordinate with SALT/mortgage interest and standard deduction:
Your decision to itemize vs. take the standard deduction interacts with charitable strategy. Re-run the numbers for 2025 vs. 2026 with your CPA to decide whether to accelerate, keep steady, or defer.

Who is most affected?

• Top-bracket filers making sizable annual gifts (the 35% cap + 0.5% floor is a “double haircut”).

• High-income itemizers whose annual giving is close to the 0.5% AGI threshold.

• Non-itemizers who give cash to public charities (modest new benefit), but not via DAFs.
  
  

FAQs

Do DAF contributions qualify for the new non-itemizer deduction?
No. The non-itemizer deduction is for cash gifts to qualified public charities and excludes DAFs and supporting organizations.

Does the non-itemizer deduction lower AGI?
No. It reduces taxable income, not AGI—important for IRMAA, NIIT, Roth limits, etc.

Are these changes finalized for 2026?
Yes—under the One Big Beautiful Bill Act for tax years starting after Dec. 31, 2025. Details are summarized by multiple professional sources. (Greenberg Traurig)

What to do next

1. If you routinely give: Evaluate whether accelerating into 2025 makes sense; consider a DAF to maintain your grantmaking cadence.

2. If you won’t itemize in 2026: Plan around the $1,000/$2,000 cash deduction to public charities—and know it won’t reduce AGI.

3. If you’re 70½+: Review QCDs from IRAs for AGI-efficient giving.

4. Coordinate early: We’ll run a side-by-side for your 2025 vs. 2026 giving and collaborate with your CPA.

Conclusion

The goal of your giving doesn’t change—but the math will. With a 0.5% AGI floor and a 35% cap arriving in 2026, many high-income families will see a smaller tax benefit for the same gift. The most effective response is proactive: evaluate whether to accelerate 2025 contributions, consider a donor-advised fund to keep grants steady over time, and confirm whether QCDs fit if you’re 70½+.

Disclaimer

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information in this article has been sourced from Fidelity.com, WSJ.com, Journalofaccountancy.com, and Bernstein.com.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

OP #25-0390