FAQ: Charitable Giving Tax Changes 2026

 

What are the charitable giving tax changes 2026?

The charitable giving tax changes 2026 introduce several new rules that affect how charitable donations are deducted. These include a new deduction for non-itemizers, a 0.5% AGI floor for itemized charitable deductions, and a cap on deduction benefits for taxpayers in the highest tax bracket. These changes may reduce the tax value of some donations depending on income level and giving strategy.

Can I deduct charitable donations if I don’t itemize in 2026?

Yes. Starting in 2026, taxpayers who take the standard deduction can still deduct charitable contributions. Single filers can deduct up to $1,000 in cash donations, while married couples filing jointly can deduct up to $2,000. The donation must be made in cash to a qualified 501(c)(3) charity.

What is the 0.5% AGI charitable deduction floor?

Beginning in 2026, taxpayers who itemize can only deduct charitable donations that exceed 0.5% of their Adjusted Gross Income (AGI). For example, if your AGI is $200,000, the first $1,000 of charitable donations will not be deductible.

Do charitable deduction limits still apply in 2026?

Yes. Charitable deduction limits based on AGI still apply. Cash donations can be deducted up to 60% of AGI, appreciated assets held longer than one year are limited to 30% of AGI, and certain non-cash donations are limited to 50% of AGI. Any unused deduction can typically be carried forward for up to five years.

How do charitable donations work for business owners?

For most business structures such as S corporations, partnerships, and LLCs, charitable donations flow through to the owner’s personal tax return. This means the deduction is subject to personal tax rules rather than being taken directly as a business expense.

What strategies can help reduce taxes when donating to charity?

Several strategies can help maximize the tax benefit of charitable giving. These include bunching donations into one tax year, donating appreciated assets instead of cash, and using Qualified Charitable Distributions (QCDs) from an IRA if you are age 70½ or older.

Will the charitable giving tax changes 2026 reduce tax deductions?

In some cases, yes. The new 0.5% AGI deduction floor and the 35% cap on deduction benefits for high-income taxpayers may reduce the tax savings from charitable donations. However, strategic tax planning can help preserve the value of these deductions.

Transcript

[00:00:00] Most business owners, they give to charity because it feels right. They support causes that they care about, and then they write checks and they assume the tax deduction will take care of itself. But starting in 2026, that assumption can quietly cost you thousands of dollars thanks to the one big, beautiful Bill Act.

Charitable giving rules are changing in a big way and depending on your income. Your entity type and how you give, you might be donating the same amount, but getting less back from the IRS today, I’m gonna break down exactly what changed, who wins, who loses, and how smart business owners can still give generously without sabotaging their entire tax plan.

 So let’s get started and I wanna talk about this concept of charity [00:01:00] to begin with and, and what I always say is. Look for your passion. Look at, look at what your heart is wanting to do with charity before you think of a tax benefit. You know, charity should be something that comes from the heart, should be something that you really care about.

And so I don’t want people thinking about charity from a tax perspective and then turn it determining out. Find out where, where do you want to give? Who do you want to give to? How much do you want to give away? And then once you have that figured out, then let’s look at the tax benefit. Essentially we wanna look at aligning kind of your generosity plan, your generosity idea with strategy, and making sure that we’re doing it correctly.

So, it’s not to say that don’t think about taxes at all, but I don’t want taxes to drive , how much you would give and who you would give to. So I just wanna kind to break that down. Now generally when we talk about giving to charity, you need to itemize to get deductions. So and, and we’ll talk about a slight change to this later in, in some of the benefits there, but in order to get a charitable [00:02:00] deduction, generally stating you would have to take itemized deductions.

And so the, the standard deduction has been increased after the tax cuts in job direct by a lot. And so a lot of people, they don’t realize this, but they’re not actually getting a tax deduction because they’re not itemizing. Or again, we’ll talk about changes to that. But what I do wanna talk about here is that when you itemize, there are some max limitations.

So the max deduction that you can get, and it’s gonna depend on the type of donation that you’re giving. So if you are giving a cash donation, the max that you can give is up to 60% of your adjusted gross income. Or a GI if you’re giving an appreciated capital gain property that you’ve held for over a year.

So think of something like stocks or crypto or something like that. The max that you can give or take a deduction for is 30% of a GI. And if you’re giving non-cash donations, so think of things like inventory or even capital gain. Property that you held have held for less than a year. The max deduction you can give is 50% of [00:03:00] a GI.

So just as an example, if your A GI is a hundred thousand dollars, the max. Charitable contribution of cash would be 60% of that, so 60,000. So if you give $60,000 in in cash to charity, you’d be able to take that deduction. If you give 65,000, the 5,000 will be disallowed because you’re over that cap.

And again, these are generally stains. Now, if you’re giving to a private foundation. Those numbers change slightly. That cash turns to 30%. Those capital gains and non-cash donations turn to 20%. So just remember that if you’re giving a private foundation, that changes a little bit. Those caps change a little bit, but generally stating cash donations.

You can get a deduction up to 60% of a g. I appreciated capital gain property that you’ve held for over a year. Think stocks, things like that. Up to 30% of a GI in the non-cash donations up to 50% of a GI. Now a key thing to think about, if you go over and above that, you can carry forward any excess contributions up to five years.

That’s super powerful. It’s not that these are gone necessarily forever. You [00:04:00] can carry them forward up to five years. Now that 60% cash ceiling for a GI that was made permanent per, per permanent, with the one big beautiful bill act. This used to be 50% before 2018. This in 20 20 18, they bumped to 60% and that has now been made permanent.

So this is for cash donations. 60% of a GI is now made permanent. So that’s, that’s good news. That’s a, that’s a win. Now let’s talk about a new. Charitable deduction for non item items. So what’s, what’s what I’m talking about now is talking about if you itemize, and that’s generally, at least in the past, the only way you would be able to get a charitable deduction is if you were to itemize.

Those are the limitations. But with the one big beautiful bill, they, they made an adjustment to forward that you can get charitable deduction even if you do not. Itemized. Let’s talk about that again. Typically, limited itemized deductions. And again, like I mentioned, with the standard deduction, nearly doubling or even more in doubling.

And at this point now a lot of people that [00:05:00] used to itemize because they would’ve mortgage interest, they would have property taxes, they’d have all these different things they used to itemize, and they would always get a deduction from cash to donations. Now, with that standard deduction, nearly doubling a lot of people.

They don’t take itemized deductions anymore because the standard deduction gives them a better benefit. So they’re donating, they’re donating, donating, donate to charity, but they’re not getting that tax benefit because they’re taking the standard deduction. Well, in 2026, starting in 2026, the one big beautiful bill act acted an option for a charitable deduction for those that do not itemize, and that deduction that they can get is if you’re single, it’s a thousand dollars, and if you’re married, it’s $2,000. Now, a couple things. This is only for cash donations. So if you do not itemize deductions and you give cash donations, and you take the standard deductions starting in 2026, if you’re single, you can get a thousand dollars charitable contribution deduction for that.

And if you’re married, you can get a 2000. Now this reduces taxable income. So if you got a hundred thousand dollars in taxable income and you’re married and you [00:06:00] gave $2,000, you no. Your taxable income goes down to $98,000. This is not a GI, so it’s not an above the line deduction. It’s a reduction in taxable income.

Now, one other key thing to note on this this non itemized deduction, if you’re making contributions to a donor-advised fund or a DAF or private foundation, that’s not included in here. So this has to be cash donations to a 5 0 1 C3, not a DAF or something like that. And again, with this, there is no need to itemize.

So this is another. Win for taxpayers, especially for those that giving, hopefully this improves and, and, and gives motivation for people to give. And again, a lot of people, if you were just taking the standard deduction and you weren’t itemizing, you weren’t getting any benefit from it, now you at least get something again, single, a thousand dollars up to a thousand dollars deduction if you’re married up to a $2,000 deduction.

Alright, so now let’s talk about the next change. That this bill did, and this is a new charitable deduction floor, and this was for itemizes, so this is [00:07:00] gonna be a, a bad win or a, a, a loss for taxpayers. But we’re gonna talk about this starting in 2026, after the one big beautiful bill act there is now a 0.5%.

A GI floor for charitable contributions. So what does this mean? Basically, if you itemize, your charitable deductions are only allowed above 0.5. So a half a percent of your A GI. So let’s go through an example. ’cause I can think that this will help. Drive home. You know what this means? Let’s say that you have an adjusted gross income on an A GI of $200,000.

If you make a donation of $10,000 throughout the year, first you have a 0.5% of a GI floor. So that’s gonna be a thousand dollars. $200,000 is your A GIA. Half a percent of that is $1,000. That’s your floor. So if you gave $10,000, you only get to deduct. The items over that floor of $1,000. So in this case, if you gave $10,000, you’d only get a $9,000 deduction, whatever your [00:08:00] donation was, minus the half a percent floor, gets you a $9,000 DON deduction.

If you were to give $10,000 and your a GI was $200,000 of as an example. So hopefully that helps kind of understand kinda where this floor comes in against a 0.5% a GI floor, any charitable contributions that you make o over and above that 0.5% a GI floor. You get to take a deduction for it. If it’s under that, you get no deduction for it.

Now this is really kind of the first that we’ve ever seen. The government put something like this, so, you know, it’s, it’s not, it’s not, it’s not something that we like to see, especially from a charitable aspect. There’s reasons behind it. There’s planning that we can do about it. Especially people that give smaller amount gifts they definitely get punished in this area.

So we’re gonna talk about some planning opportunities. How do we get past this? How do we find a strategy around this concept? But just know that’s kind of one of the big changes. That is what we consider a loss. So a couple wins. We’ve talked about a couple losses now. But let me pause right there for a second because if you’re listening to this and thinking, I really should be doing more proactive tax [00:09:00] planning, you’re not wrong.

We just put together a tax saving starter kit specifically for business owners who want clarity instead of guesswork. It includes our most overlooked tax deductions. It includes real life examples of clients that we worked with, saving them 5,000 to $25,000. More, and it also includes a bonus discovery call with our team so you can see what actually applies to your situation and how it works.

This, this Tax savings starter kit is completely free. Just go to tax savings podcast.com/starter kit. Again, that’s tax savings podcast.com/starter kit. Alright, so let’s get back to charitable giving. The other big change is that there is now a cap for high income earners when it comes to charitable deductions.

And so this was part of the one big beautiful Bill Act starting in 2026. If you are in the tops top tax bracket, which would be 37%, your itemized deductions are now capped at a 35% tax benefit. So if you’re in the top tax bracket, which is [00:10:00] 37%, your itemized deductions are capped at a 35% tax benefit. So let’s give an example.

If you give a a hundred thousand dollars donation, a charitable contribution of a hundred thousand dollars, generally, that would save you. $37,000. Take your donation times, your whatever tax bracket you’re in, that’s gonna be your tax savings. So a hundred thousand times 37, if you’re in the 37% tax bracket, means you would save $37,000 in taxes with that $100,000 donation.

Well now starting in 2026. You are capped at that 35%. So that typically what would’ve been a $37,000 tax tax benefit now turns to 35%. So some weird calculations there, some weird kind of numbers that help make that add up and, and go through. But that is definitely another loss as part of this one big, beautiful bill, especially for those high income earners.

You have a cap now on the charitable contribution, which caps it at that 35% tax. Benefit. So that tax benefit, if you’re in the highest tax [00:11:00] bracket, the tax benefit is capped at 35%. Let’s talk about some business giving changes and, and this isn’t necessarily gonna impact too many people, but I do wanna talk about it slightly.

So when it comes to business and if you’re a business that’s giving to charity generally stating for, for most business entities other than C corporations. Charitable contributions are just gonna flow through to you as the owner individually. So what we talk about next is not really gonna change or affect you.

Everything we’ve talked about up to this point obviously will affect you because as a business owner, if you’re a sole proprietorship, a partnership, an S corporation, a single member, LLC, whatever it is, all of the charitable contributions flow through to you. As the business owner onto your personal tax return, it’s not handled on the business side.

And that’s also oftentimes a, a reason why we often say, is there a way that we can turn charitable giving into advertising? And that can be a tax strategy in and of itself. As an example, let’s say that you wanna support a nonprofit by putting you must support a nonprofit. [00:12:00] And, and is there a way that you could instead support them by putting your name?

On some of their advertising or putting your name on a t-shirt of theirs, and so you’re supporting that nonprofit. But it’s also be beneficial to your business. And so that’s how we can sometimes turn charitable giving into an advertising expense. There is some ways to do that and we talk about that in tax ’em all the time.

But that’s some of the reasons why we do that now. So let’s talk about some business giving changes. If you are a C corp, and this is for C corporations, specifically, if you’re a C corp that elect S Corp status. Not relevant to you. This is specifically for C corporations. If you’re a C corporation, there was always a limit of 10% of taxable income with a five year carry forward.

Now, the one big, beautiful bill introduced a new floor where you can only deduct triple contributions to the extent that they exceed 1% of taxable income. So there used to be a 10% limit. A 10% of taxable income is the max charitable deduction you can get. Of course, anything over that would carry forward with the one big, beautiful bill.[00:13:00]

There’s now a floor where you only get a deduction for anything over 1% of taxable income. So for example, if you gave 2% of taxable income last year you would get a a benefit for that two, full 2%. This year, you’re only gonna get 1% because of that 1% floor takes away a half of it automatically. So that’s something you think about.

Again, this is just for C corporations, not for any of those past two entities, which would just flow through to you. Okay, so let’s talk about some planning opportunities. Obviously these are, some can be significant changes depending on where you’re at on your giving spectrum, and there’s different levels there.

There’s different income items there. There’s different types of giving there. So let’s talk about some planning opportunities with this new information. The first planning opportunity or way that we can help get past some of these losses that came through is this concept of bunching. And this concept of bunching is something that we’ve done all the time.

We’ve even done it in previous years. But this concept of bunching is basically moving, giving for two [00:14:00] years. Into one year. So let’s say you give $10,000 a year to your church. So instead of giving $10,000 in year one and $10,000 in year two, maybe you bunch your gifts and you give that full $20,000 in year one, or that full $20,000 in year two.

So you get all of those charitable contributions, you’re bunching them into one year. So let’s talk about an example to kind of give you an example of where this would land on as far as, true deductions for it. Let’s say that you had $200,000 in adjusted gross income, so $200,000 a GI, and you normally give 4% of your income per year to charity, so that’s $8,000 per year if you were, didn’t do any bunching, so you just get $8,000 in year one, $8,000 in year two, you’re gonna hit that 0.5% floor each year, and so that 0.5% floor is gonna be a thousand dollars.

0.5% of $200,000 is a thousand dollars. So of that $8,000 that that you contributed, you’re only gonna get a $7,000 [00:15:00] deduction in year one. And that $8,000 you contributed in year two, you’re only gonna get a $7,000 deduction. So over the course of two years. You’re gonna get a $14,000 charitable deduction.

A thousand dollars dropped off each year due to that new floor that got put in. But let’s say that instead of giving those in two years, you bunched them into one year. So instead of giving 8,000 and 8,000, you did $16,000 all in one year. Now we still have that half a percent floor, so we still have that a thousand dollars haircut in that half, in this example of $200,000 a GI.

But now it’s on 16,000. So 16,000. Minus that thousand dollars haircut gives us a $15,000 deduction. So if we didn’t bunch over the course of two years, we got a $14,000 deduction. If we bunched, we get a $15,000 deduction. So the benefit there is you get an extra thousand dollars in deductions.

Now, you know this might not make sense at certain income levels or certain giving levels, but it can be super powerful as we look into this. So run some numbers, see if bunching makes sense in your situation and your [00:16:00] giving threshold and, and what that might look like. The second planning opportunity that comes along with this is something we call care qualified charitable distributions or, or QS or qds.

And these are basically distributions that you make from your IRA. And now this is specifically for those that are over 70 and a half. So if you’re over 70 and a half an age you can make qualified charitable distributions from your IRA And we make, when we make these qds, they bypass the itemized deductions entirely so they’re not subject to the half a percent a GI floor.

So if you are over 70 and a half, you absolutely should be doing your giving via qualified charitable. Distributions qds. If you’re over 70 and a half because you’re, you’re bypassing this new floor, this new issue, this, these concerns that we have, you can get past it. If you’re over that age. So instead of just giving cash or, or taking money out of your IRA and then making the distribution or making the charitable contribution, if you’re over 70 and a half an age, definitely make those charitable contributions out of qcd.

Okay, so let’s [00:17:00] kind of wrap up everything we talked about today. What are the changes? What are the big impacts? What are the things we wanna be thinking about? Change number one, a GI, giving caps for itemizes. So if you are an itemize, there are some caps on the max that you can get. And this is based on adjusted gross income.

And if you’re giving cash. It’s 60% of adjusted gross income. If you’re giving stock that you’ve held, it’s 30% of your agis, the max that you can take in the year. And if you’re giving non-cash donations, it’s 50% of agis the max you can take. Now with these giving caps for itemizes, any giving you do over and above that cap, you will be carried forward so you don’t lose it completely.

It’ll get carried. Forward. So let’s say you have a big year and you, you put a hundred percent of your income into charity. Well, the, and it’s cash. The max you can take is 60%, but that overage that you did, that’ll carry you forward up to five years. The second biggest change is that starting in 2026, there’s a new charitable deduction for non.

Itemizes. [00:18:00] So if you do not itemize, you can now get a charitable deduction. If you’re single, that’s a thousand dollars. The max is a thousand dollars per year, and if you’re married, the max is $2,000 per year, and that charitable deduction is gonna reduce your taxable income. The third major change we wanna talk about is that starting in 2026, there’s a new charitable deduction floor, and this is for itemizes.

So if you itemize, your charitable deductions are only allowed above 0.5%. All of your adjusted gross income. So you only get a deduction for any charitable contributions that exceed 0.5% of your adjusted income. Alright, number four is a new cap for high income murders. If you’re in the top tax bracket, that 37% tax bracket, your itemized deductions are now capped at a 35% tax benefit.

So that’s another big change. And then finally, number five. Again, as we always talk about, think about charity first in tax Second, we always wanna think about where’s our heart at? What do we give? What [00:19:00] do we care about? What do we want to help? From a nonprofit standpoint, think charity first and then tax second.

That doesn’t mean don’t be strategic. It doesn’t mean don’t think about tax. I’m just saying think of charity first. Find your heart and then find out, okay, where is the tax benefit of it? And then be strategic. Maybe we might looking at, we might start looking at bunching our charitable contributions, or maybe we might start looking at qcd for our charitable giving.

Be strategic. Once you kind of figured out what is your, what is your overall giving outlook over the next couple years, determine that and then start to be strategic about it Now. Charitable giving didn’t get worse. It just, it just got a little bit more complicated. And the people who win under these new rules won’t be the most generous.

They’ll be the most intentional. If you found what we talked about today helpful, don’t forget to hit subscribe, hit that like button and share with a business owner who’s sick of paying too much in tax. And if you want help from our team of tax professionals implementing these strategies along with so many others, visit us at Tax Zone.

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