The One Big Beautiful Bill Act has reshaped the landscape of investing, taxes, and strategic wealth management. Among the most significant changes are the new federal rules governing charitable giving, set to take effect in 2026. Below, we break down these updates and explore strategies for maximizing the impact of your charitable contributions.
Understanding the New Deduction Rules
Beginning in tax year 2026, if you itemize your deductions, charitable contributions will only be deductible to the extent they exceed 0.5% of your Adjusted Gross Income (AGI).
Example:
If your AGI is $250,000, then 0.5% would equal $1,250. If you donate $5,000, only the portion above the 0.5% floor, $3,750, will be deductible.
The existing percentage-of-AGI limits (e.g., cash gifts to public charities up to 60% of AGI) still apply after this new floor is satisfied.
New Opportunity for Non-Itemizers
For those who take the standard deduction, there will be a new above-the-line charitable deduction beginning in 2026:
- Up to $1,000 for single filers
- Up to $2,000 for married couples filing jointly
Only cash gifts to public charities qualify. Donations to donor-advised funds (DAFs) or supporting organizations are excluded.
This marks a major change. Previously, non-itemizers generally could not claim charitable deductions (aside from a temporary $300/$600 above-the-line deduction allowed under the CARES Act in 2020–2021).
New Limit on the Tax Benefit
Under current rules, high earners in the 37% tax bracket realize $37,000 in tax savings from a fully deductible $100,000 charitable gift.
Starting in 2026, the top marginal income tax rate remains 37%, but the value of itemized deductions for top-bracket taxpayers is capped at 35%.
In practice, this means that the same $100,000 donation would yield no more than $35,000 in federal tax savings, and typically somewhat less, because the first 0.5% of AGI must be exceeded before any portion of charitable contributions becomes deductible.
Example: For a taxpayer with $1 million in AGI, the first $5,000 of charitable gifts ($1,000,000 × 0.5%) would not be deductible. The remaining $95,000 would be subject to the 35% cap, producing a maximum deduction benefit of about $33,250, rather than $35,000.
Strategies to Maximize the Impact of Your Giving
The National Philanthropic Trust (NPT) highlights several ways to preserve tax efficiency while meeting your philanthropic goals:
1) Accelerate Donations Before 2026
If you’re in the 37% tax bracket, consider front-loading charitable contributions before the new rules take effect. This allows you to lock in the higher deduction rate and avoid the upcoming 0.5% AGI floor.
2) “Bunch” Contributions to Clear the 0.5% AGI Floor
Bunching involves combining multiple years of planned donations into a single tax year to exceed the deduction threshold. This strategy lets you itemize in that year and then claim the standard deduction in subsequent years.
3) Donate Appreciated Assets Instead of Cash
With markets near record highs, consider donating appreciated securities, real estate, or other assets. Doing so can help avoid capital gains taxes while still deducting the fair market value of the donation.
4) Utilize a Donor-Advised Fund (DAF)
DAFs remain a powerful tool for tax-efficient giving and strategic philanthropy. You can contribute appreciated assets to a DAF, receive an immediate deduction (subject to the 0.5% AGI floor and other limits), and recommend grants over time.
Note: Cash gifts to DAFs do not qualify for the new non-itemizer (above-the-line) deduction.
In Conclusion
For high-income individuals and families, timing and strategy around charitable giving are more important than ever. With the 2026 changes approaching, thoughtful planning, ideally coordinated with your tax and financial advisors, can ensure your giving remains both impactful and tax-efficient under the new framework.