Are you aware of the charitable deductions changes resulting from the One Big Beautiful Bill Act (OBBBA), effective in 2026?
In short, the tax code is shifting from a broad-based incentive model to a threshold-based incentive model. This, in turn, rewards larger, more intentional giving and encourages structured planning vehicles.
Let’s explore in more detail. Note that this article focuses on individual taxpayers and not corporations.
2026 Charitable Deductions Details
Here are the basics for taxpayers:
- These tax code changes go into effect January 1, 2026, as a result of OBBBA.
- New is a 0.5% adjusted gross income (AGI) floor for itemizations. Any donations below that threshold do not qualify for a deduction.
- Also new is a 35% deduction cap if you are a high-income donor.
- If you do not itemize, and you donate cash to qualifying public charities, you may make use of a deduction – $1000 for single filers or $2000 for married, joint filers.
>> See Kiplinger’s 3 Major Changes to the Charitable Deduction for 2026
For or Against Charitable Giving?
These changes differ structurally from what they replace. In other words, the changes neither eliminate deductions for charitable giving nor go against it. Rather, they change how charitable giving can benefit you, and can add complexity if you opt for itemization. Strategy matters more than ever.
>> For additional perspective, see How the New Charitable Deduction Floors Work.
Recommended Strategies
What, then, are recommended strategies for charitable giving so you can benefit from charitable deductions?
Consider the Strategy of “Bunching”
Bunching is combining several years of giving into one year to exceed the standard deduction and AGI floor for that year.
Donor-Advised Funds (DAFs) for Better Bunching
A way to implement bunching is through donor-advised Funds or DAFs. According to Your Charitable Deductions Tax Guide (2025 & 2026),
“Donor-advised funds like Daffy make bunching charitable contributions simple and strategic. You can contribute the amount you’d like to bunch to your Daffy fund and immediately receive the tax deduction for that amount. You can then distribute those funds to your chosen charities on your own timeline.
So if we continue with the previous example, you can bunch two years of contributions ($16,000) into your Daffy fund in 2026, claim the full deduction, and then continue to give $8,000 annually in 2026 and 2027 from the funds you’ve already set aside. This approach lets you maximize your tax benefits while maintaining your regular giving rhythm to the organizations you support.“
Multi-Year Planning Matters
As we highlighted in Managing New Tax Changes to Optimize Your Financial Plan, change offers you opportunities. Work with your financial advisor, revisit your plans – both financial and philanthropic – and consider multi-year strategies.
Who Wins and Loses with the OBBBA Charitable Deductions Changes?
One question we asked ourselves was whether there were definite taxpayer winners and losers with these changes.
Winners
- Standard-deduction filers who make direct cash gifts to operating charities. They gain a new above-the-line charitable deduction (up to $1,000 single / $2,000 joint). (Kiplinger)
- Older donors (age 70½+) who can use Qualified Charitable Distributions (QCDs) from IRAs. QCDs reduce taxable income and, per ACTEC, avoid the new “½ of 1%” reduction that applies to itemized charitable deductions. (Actec Foundation)
- Itemizers who already give well above 0.5% of AGI (especially larger donors). The new rule disallows only the first 0.5% of AGI in itemized charitable gifts; for higher giving levels, the floor reduces (but doesn’t eliminate) deductibility. (Bipartisan Policy Center)
Losers
- Itemizers whose annual giving is below 0.5% of AGI. BPC notes itemizers “cannot claim a deduction” for contributions equal to the first 0.5% of AGI, and for some taxpayers this can “effectively eliminate” their charitable deduction. (Bipartisan Policy Center)
- Top-bracket high-income itemizers (relative to 2025). The value of itemized charitable deductions is capped at 35% for those in the highest bracket, lowering the effective tax benefit versus 37% scenarios discussed in coverage. (Kiplinger)
- Standard-deduction filers who prefer giving via DAFs or private foundations (for purposes of the new non-itemizer deduction). Kiplinger explicitly states you can’t use the new non-itemizer deduction “in conjunction with a donor-advised fund (DAF) or private foundation.” (Kiplinger)
Charitable Deductions Example
Let’s examine an example showing how the effective cost of a $100,000 cash gift would differ between 2025 and 2026 for a hypothetical itemizing taxpayer — based strictly on the following documented rule changes:
1. No Floor in 2025
- Under current 2025 law, itemizers can generally deduct charitable contributions dollar-for-dollar (subject to AGI limits) with no 0.5% floor. (Holland & Knight)
2. 0.5 % AGI Floor in 2026
- Starting in 2026, itemized deductions for charitable contributions are only allowed to the extent they exceed 0.5% of Adjusted Gross Income (AGI). (Holland & Knight)
- Example from published guidance: If AGI is $100,000, the first $500 (0.5 %) of charitable giving is not deductible — only the amount above $500 is deductible. (Carnegie Investment Counsel Blog)
3. 35% Cap on Deduction Value for High-Income Itemizers
- In 2026, even if you are in the 37% bracket, the value of an itemized charitable deduction is capped at 35% of the allowed deduction. (WilmerHale)
Assumptions: This taxpayer itemizes deductions, has sufficiently high income such that the deduction is relevant and not limited by other AGI percentage caps, and falls into the highest tax bracket.
2025 Scenario (No Floor, 37% or Full Value Rule Still Applies)
- 2025 rule: A $100,000 deductible charitable gift would (in principle) reduce taxable income by $100,000 and would typically generate a deduction valued at the donor’s marginal tax rate (say 37% if they’re in the top bracket). (This is how charitable itemized deductions worked under pre-2026 law.) (Holland & Knight)
- Tax benefit under 2025 law: ~$37,000 reduction in tax liability (if the donor is in the 37% marginal bracket).
- After-tax cost of giving $100,000 in 2025: $100,000 − $37,000 = $63,000 effective cost to the donor (roughly).
2026 Scenario (0.5 % Floor + 35% Cap)
Under the 2026 OBBBA rules:
- First 0.5% of AGI yields no deduction. For this example, if AGI were roughly equal to the gift (for simplicity), the first $500 of the $100,000 gift would be non-deductible because of the 0.5% floor. (Carnegie Investment Counsel Blog)
- Only the net deductible portion is $99,500. This is a modest adjustment, but then the deduction cannot be taken at full theoretical value.
- Deduction value capped at 35%. Under 2026 rules, higher-income itemizers can only claim a deduction up to 35% of the eligible amount. (WilmerHale). So the maximum tax break would be:
35% × $99,500 ≈ $34,825 - After-tax cost in 2026 (itemizer): $100,000 − $34,825 → $65,175 effective cost
To Recap 2025 vs. 2026:
| Year | Deductible Amount | Tax Benefit % | Estimated Tax Benefit | Estimated After-Tax Cost |
|---|---|---|---|---|
| 2025 | $100,000 | ~37% | ~$37,000 | ~$63,000 |
| 2026 | ~$99,500* | 35% | ~$34,825 | ~$65,175 |
Under the documented changes, a generous donor in the top bracket appears to get slightly less tax benefit from a large cash gift in 2026 compared with 2025 — even though the floor’s effect may be modest for a large gift like $100,000.
Additional OBBBA Charitable Deduction Changes Resources
You may find these additional articles about the OBBBA Charitable Deduction Changes helpful:
>> Your Income Tax Charitable Deductions Are Different in 2026
>> OBBB Charitable Deduction Rules Reshape Giving Strategies
What Opportunities Do These Charitable Deductions Changes Offer You?
The bottom line with all of these changes? The tax landscape for 2026 is complex, with multiple moving parts that affect households differently. Viewing these holistically and planning accordingly can increase the likelihood of financial success. For that reason, we recommend viewing them as an invaluable opportunity to optimize your own financial planning.
Let us know if you have any questions. Don’t hesitate to reach out with any questions for a complimentary consultation.
Thanks for reading.
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Note: This blog article is intended for general informational purposes only. Nothing in it should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.