Quick Summary: New tax rules starting in 2026 change how you claim charitable deductions. You now need to exceed 0.5% of your adjusted gross income before any donation becomes deductible. Smart strategies like bunching gifts, donating appreciated stock, and using donor-advised funds can help you maximize tax savings while supporting causes you care about.
Quick Facts About Charitable Deductions
| Category | Details |
|---|---|
| Standard Deduction (2026) | $15,750 (single) / $31,500 (joint) |
| New AGI Floor (2026) | 0.5% of adjusted gross income |
| Cash Donation Limit | 60% of AGI (permanent) |
| Appreciated Assets Limit | 30% of AGI |
| Non-Itemizer Deduction | $1,000 (single) / $2,000 (joint) |
| Carryforward Period | 5 years for most donations |
| QCD Limit (Age 70½+) | $108,000 per person |
What Are Charitable Contribution Deductions?
Charitable contribution deductions let you reduce your taxable income when you donate to qualified organizations. You give money or assets to a 501(c)(3) nonprofit, and the IRS allows you to subtract that amount from your income before calculating your tax bill.
The deduction only works if you itemize deductions on Schedule A of your tax return. You must choose between itemizing and taking the standard deduction—whichever provides the larger tax benefit.
For tax years starting in 2026, major changes affect how these deductions work. The One Big Beautiful Bill Act introduced a 0.5% AGI floor, meaning only donations exceeding this threshold count toward your deduction. These changes make strategic planning more important than ever.
Major Tax Law Changes Taking Effect in 2026
The New 0.5% AGI Floor
Starting in 2026, you can only deduct charitable contributions that exceed 0.5% of your adjusted gross income.
Here’s how it works:
- Your AGI is $100,000 → First $500 of donations aren’t deductible
- Your AGI is $200,000 → First $1,000 of donations aren’t deductible
- Your AGI is $300,000 → First $1,500 of donations aren’t deductible
If you donate exactly 0.5% of your AGI or less, you get zero tax benefit from those gifts. This floor effectively eliminates deductions for smaller charitable donors who itemize.
New Above-the-Line Deduction for Non-Itemizers
Starting in 2026, taxpayers taking the standard deduction can deduct up to $1,000 (single filers) or $2,000 (married filing jointly) for cash donations made directly to public charities.
This deduction excludes donor-advised funds and private foundations. It applies only to cash gifts given directly to operating charities.
Permanent 60% AGI Limit for Cash Donations
The law makes permanent the 60% AGI limit for cash contributions to public charities. This was set to expire but now continues indefinitely.
You can deduct cash donations up to 60% of your AGI in a single year. For appreciated non-cash assets like stock, the limit remains at 30% of AGI.
35% Cap on Itemized Deduction Value
Taxpayers in the 37% tax bracket face a new limitation starting in 2026. The value of their itemized deductions, including charitable contributions, is capped at 35 cents per dollar instead of 37 cents.
This reduces the tax benefit for high-income earners. A $10,000 donation that previously saved $3,700 in taxes now saves only $3,500.
Best Charitable Contribution Strategies for 2026
Strategy 1: Bunching Donations
Bunching concentrates multiple years of charitable giving into a single tax year. You alternate between itemizing in high-giving years and taking the standard deduction in other years.
How it works: Instead of giving $10,000 annually, you donate $30,000 in 2026, zero in 2027, and $30,000 in 2028.
In 2026, your itemized deductions exceed the standard deduction, and your donations clear the 0.5% AGI floor. In 2027, you take the standard deduction. This pattern delivers more total tax savings than giving the same amount evenly each year.
Example: Sarah and James, married filing jointly with $200,000 AGI, give $8,000 annually to charity. They also have $15,000 in mortgage interest and state taxes.
Option 1 (Annual Giving):
- 2026 deductions: $23,000 ($15,000 + $8,000)
- 2026 AGI floor: $1,000
- Net deductible: $22,000
- Take standard deduction instead: $31,500
- 2027: Same result—standard deduction is better
Option 2 (Bunching):
- 2026: Donate $24,000 + $15,000 other = $39,000 total
- Minus $1,000 floor = $38,000 deductible
- Itemize and save $8,360 in taxes (at 22% rate)
- 2027: Donate $0, take $31,500 standard deduction
- Total two-year deductions: $69,500 vs. $63,000
Bunching delivers $6,500 more in deductions over two years.
Strategy 2: Donate Appreciated Stock
Donating long-term appreciated securities produces better tax results than selling them and donating cash.
Why it works: You avoid capital gains tax on the appreciation and deduct the full market value of the stock. The charity receives the full value tax-free.
Example: You bought 100 shares of stock for $5,000 five years ago. Today it’s worth $15,000. You want to donate $15,000 to charity.
Option 1 (Sell and Donate Cash):
- Sell stock: $15,000 proceeds
- Capital gains: $10,000
- Capital gains tax (15%): $1,500
- Donate to charity: $13,500 (after paying taxes)
- Your tax deduction: $13,500
Option 2 (Donate Stock Directly):
- Transfer stock to charity: $15,000 value
- Capital gains tax: $0
- Charity receives: $15,000 (full value)
- Your tax deduction: $15,000
Direct donation delivers $1,500 more to charity and a $1,500 larger deduction for you.
Strategy 3: Use Donor-Advised Funds
Donor-advised funds (DAFs) let you make a large tax-deductible contribution now and distribute grants to charities over time.
How it works: You contribute cash or appreciated assets to a DAF account. You receive an immediate tax deduction for the full amount. The money grows tax-free in the account. You recommend grants to qualified charities whenever you choose.
Benefits:
- Immediate tax deduction in the contribution year
- Simplifies bunching strategies
- Provides investment growth potential
- Gives you time to research charities
- Reduces administrative burden (one donation, multiple grants)
Perfect for:
- Bunching multiple years of donations
- Windfall years (bonus, inheritance, business sale)
- Donating appreciated stock worth over $10,000
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Strategy 4: Qualified Charitable Distributions (QCDs)
If you’re age 70½ or older with a traditional IRA, QCDs offer powerful tax advantages starting in 2026.
How it works: Transfer up to $108,000 directly from your IRA to qualified charities. The distribution isn’t included in your taxable income and counts toward your required minimum distribution.
Why QCDs beat regular donations:
- Bypasses the 0.5% AGI floor entirely
- Avoids the 35% itemized deduction cap
- Doesn’t increase your AGI (avoids Medicare premium surcharges)
- Satisfies RMD requirements
- Works whether you itemize or take the standard deduction
Example: Michael, age 72, has $300,000 AGI and owes a $25,000 RMD. He wants to donate $10,000 to charity.
Option 1 (Regular Donation):
- RMD increases AGI to $325,000
- Donate $10,000 cash
- AGI floor: $1,625
- Net deduction: $8,375
- Tax bracket: 24%
- Tax savings: $2,010
Option 2 (QCD):
- Donate $10,000 via QCD
- Reduces RMD to $15,000
- AGI stays at $315,000
- Tax savings: $2,400 (24% × $10,000)
The QCD saves an additional $390 in taxes and reduces overall AGI.
Strategy 5: Accelerate Giving into Current Year
If you plan significant charitable giving and itemize deductions, consider making those donations before December 31 to take advantage of current rules.
Why 2025 matters:
- No 0.5% AGI floor applies in tax years before 2026
- High earners in the 37% bracket get full 37% value
- Current itemized deduction rules are more favorable
Who should consider this:
- Anyone planning large gifts over the next few years
- High-income earners who itemize
- People expecting income drops in future years
- Business owners planning liquidity events
Strategy 6: Private Foundation vs. DAF Comparison
Donors with substantial charitable assets sometimes choose between private foundations and donor-advised funds.
| Factor | Donor-Advised Fund | Private Foundation |
|---|---|---|
| Minimum to Start | $5,000-$25,000 | $1,000,000+ |
| Setup Costs | None | $10,000-$50,000 |
| Annual Maintenance | $100-$500 | $5,000-$25,000+ |
| Tax Deduction (Cash) | 60% of AGI | 30% of AGI |
| Tax Deduction (Stock) | 30% of AGI | 20% of AGI |
| Administrative Burden | Low | High |
| Control | Recommend grants | Full control |
| Public Disclosure | Private | Public (Form 990) |
DAFs work better for most donors. Private foundations make sense only for very wealthy families wanting complete control and public recognition.
Charitable Deduction Limits by Asset Type
Understanding contribution limits helps you plan larger gifts effectively.
Cash Donations:
- Public charities: 60% of AGI
- Private foundations: 30% of AGI
Appreciated Long-Term Assets (held over 1 year):
- Public charities: 30% of AGI
- Private foundations: 20% of AGI
Appreciated Short-Term Assets (held 1 year or less):
- Limited to your cost basis, not fair market value
- Maximum: 50% of AGI to public charities
Ordinary Income Property:
- Business inventory, artwork you created: cost basis only
- Maximum: 50% of AGI
Excess contributions carry forward for five years.
Common Charitable Giving Mistakes
Taking Deductions Without Proper Documentation
The IRS requires specific documentation based on donation size:
- Under $250: Cancelled check or receipt
- $250-$499: Written acknowledgment from charity
- $500-$5,000: Form 8283, detailed records
- Over $5,000: Qualified appraisal plus Form 8283
Missing documentation means losing your deduction if audited.
Overvaluing Donated Property
Non-cash donations must use fair market value—what a willing buyer would pay a willing seller. Goodwill donations of used clothing shouldn’t be valued at original retail prices.
Aggressive valuations trigger audits and penalties. Use published valuation guides for common items.
Donating to Non-Qualified Organizations
Not all nonprofits qualify for tax-deductible contributions. Donations to:
- Political campaigns
- Candidates
- Homeowners associations
- Social clubs
- Foreign charities (with few exceptions)
These don’t qualify. Verify 501(c)(3) status before donating.
Missing Year-End Deadlines
Contributions count for the tax year when:
- Cash gifts: Postmarked or charged to credit card by December 31
- Stock transfers: Delivered to charity or custodian by December 31
- Pledges: Don’t count until you actually pay them
A December 31 check mailed January 2 doesn’t count for the prior tax year.
Forgetting About Carryforwards
Charitable contributions exceeding annual limits carry forward for five years. Track these carryforwards carefully—the IRS won’t do it for you.
File Form 8283 to document carryforwards and use them in consecutive years. You must apply the oldest carryforward first.
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How to Choose Which Assets to Donate
Best Assets to Give Away:
- Highly appreciated long-term stock: Maximum tax savings from avoiding capital gains
- Qualified small business stock: Eliminates gain up to $10 million
- Cryptocurrency held over one year: Avoids short-term or long-term capital gains
- Real estate with substantial appreciation: Removes large gains from taxable income
Assets to Keep:
- Cash earning 4-5% in high-yield savings: You paid no gains on this money
- Stock with unrealized losses: Sell it, take the loss, donate the proceeds
- Recently purchased stock: Minimal gains don’t justify the effort
- Retirement accounts: Use QCDs instead if eligible
The bigger the unrealized gain relative to your cost basis, the more sense direct donation makes.
Corporate Charitable Giving Changes
Starting in 2026, corporations face their own 1% floor. C corporations can only deduct charitable contributions exceeding 1% of their taxable income.
The maximum deduction remains at 10% of taxable income. Contributions below the 1% threshold can’t be deducted or carried forward. Only amounts above 10% qualify for five-year carryforward.
Corporate strategy: Bunch contributions to exceed the 1% threshold. Front-load giving in high-profit years. Consider multi-year commitments to charities that allow corporations to exceed both the 1% floor and maximize the 10% ceiling.
State Tax Considerations
Most states follow federal rules for charitable deductions, but some differences exist:
States with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming—no state charitable deduction available.
States offering additional credits: Arizona, Maryland, and Virginia offer tax credits for certain charitable donations beyond the federal deduction.
State-specific rules: California, New York, and several other states cap itemized deductions. Check your state’s rules before finalizing large gifts.
Always review state tax implications before making substantial donations.
Can I deduct charitable donations if I take the standard deduction?
Starting in 2026, yes—but with limits. Non-itemizers can deduct up to $1,000 (single filers) or $2,000 (married filing jointly) for cash donations made directly to public charities. This deduction doesn’t apply to donor-advised funds or private foundations. Before 2026, you needed to itemize to deduct any charitable contributions.
What happens if my charitable donations exceed the AGI limits?
Excess contributions carry forward for up to five years. You can use these carryforwards in future tax years, subject to the same AGI percentage limits. Conservation easements get special treatment with a 15-year carryforward period. Track carryforwards carefully on Form 8283 and apply them consecutively—you can’t skip years.
Is donating stock better than donating cash?
Yes, for appreciated long-term securities. When you donate stock held over one year, you avoid capital gains tax and deduct the full fair market value. This creates double tax savings. For stock with losses, sell it first to claim the loss, then donate the proceeds. Short-term stock (held one year or less) should be sold before donating.
Do donor-advised funds still make sense under the new rules?
Absolutely. DAFs remain one of the best tools for charitable giving. They simplify bunching strategies by allowing one large tax-deductible contribution that you distribute over multiple years. The 0.5% AGI floor and other new limitations don’t change the fundamental advantages of DAFs for strategic giving. Just note that non-itemizers cannot use their new $1,000/$2,000 deduction for DAF contributions.
Should I make a large donation in the current year before the new rules take effect?
If you itemize deductions and plan significant charitable giving over the next few years, accelerating donations into the current year avoids the 0.5% AGI floor and gives high earners the full 37% tax benefit. This strategy works best for people with windfall income, those selling businesses, or anyone planning major gifts. Consult your tax advisor about timing based on your specific situation.
he charitable deduction landscape changes significantly starting in 2026. The new 0.5% AGI floor, combined with the 35% cap for high earners, makes strategic planning essential for maximizing tax benefits.
Focus on bunching donations to clear the AGI floor, donate appreciated assets to avoid capital gains, and use donor-advised funds for flexibility. Take advantage of qualified charitable distributions if you’re eligible. Consider accelerating major gifts before the new rules take effect.
Your charitable giving creates real impact for causes you support. Smart tax planning ensures you can give more while keeping more of your money working for you. Work with qualified tax advisors to develop a giving strategy that aligns with your values and financial goals.
