Authored by Javier Simon via The Epoch Times (emphasis ours),
Donating to qualified charitable organizations under the IRS can lead to tax benefits in the form of charitable deductions.
However, tax laws are always evolving, and the One Big Beautiful Bill Act (OBBBA) has introduced significant changes to charitable deductions as of tax year 2026. These changes impact both itemizers and those who opt for the standard deduction.
Let’s delve deeper into this.
Non-Itemizer Deduction
Traditionally, charitable deductions primarily benefit itemizers. Yet, beginning in tax year 2026, those who choose the standard deduction can now deduct up to $1,000 in cash gifts to qualified operating charities if filing as single or $2,000 if married and filing jointly.
It’s important to note that this specific deduction does not apply to contributions made to donor-advised funds.
For tax year 2026, the standard deduction has been raised to $16,100 for single filers and $32,200 for married couples filing jointly. These figures will be adjusted annually to account for inflation.
These historically high standard deduction levels have been made permanent through the OBBBA, so it’s advisable to check if your total itemized deductions surpass the standard deduction.
Charitable Deduction ‘Floor’
As of tax year 2026, itemizers can only deduct the portion of their total donations that exceeds 0.5 percent of their adjusted gross income (AGI).
For example, if your AGI is $100,000, only donations exceeding $500 would be eligible for deduction. This $500 threshold is known as the “floor.” So, if an individual with an AGI of $100,000 donates $700 to an IRS-qualified children’s hospital, only $200 would be deductible ($700 – $500 = $200).
In essence, smaller donations may not result in as significant of a tax benefit—or none at all in certain instances. To work around this, many advisors suggest consolidating several years of planned donations into one tax year to surpass the floor.
New Cap for High Earners
If you fall into the highest tax bracket of 37 percent, the tax savings from your charitable deductions are capped at 35 percent. This implies that if you’re in that tax bracket, a $20,000 donation would yield $7,000 in tax savings instead of $7,400 at 37 percent.
There are various strategies to reduce your taxable income, such as maximizing pre-tax accounts like 401(k)s, IRAs, and HSAs, which could potentially lower your tax bracket.
The 60 Percent Cap Is Permanent
You can deduct cash gifts made to qualified charities up to 60 percent of your AGI. Nonetheless, you must first surpass the 0.5 percent floor.
New QCD Limits
A qualified charitable distribution (QCD) enables individuals aged 70 1/2 or older to donate up to $111,000 in 2026 to a qualified charity directly from a traditional IRA—and this donation won’t count towards your taxable income.
Additionally, your QCD can fulfill your required minimum distribution (RMD). RMDs are specific amounts that most individuals must withdraw annually from their traditional IRAs once they reach age 73, regardless of necessity.
By the time you reach 73, your IRA balance may have grown substantially. RMDs are partly based on your IRA balance, which can potentially push you into a higher tax bracket. It might even trigger net investment income tax and surcharges on your Medicare Part B and Part D premiums through what’s known as the income-related monthly adjustment amount.
Therefore, having your QCD satisfy your RMD can be highly advantageous. Nevertheless, there are limits to QCDs, so if your RMD for 2026 exceeds $111,000, the surplus would still be taxable. In essence, your QCD can partially or fully fulfill your RMD.
The Bottom Line
Charitable giving plays a crucial role in the financial plans of many individuals. Not only does it enable them to support causes they are passionate about, but it also provides tax benefits. Nonetheless, tax laws frequently fluctuate. The OBBBA is a comprehensive law that has ushered in significant changes to charitable deductions, underscoring the importance of discussing your philanthropic goals for the year with a qualified tax advisor.
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