Don't Miss Expanded 2026 Charitable Donation Deduction Before Year-End
The One Big Beautiful Bill Act made substantial changes to how American taxpayers deduct contributions to charities starting with the 2026 tax year. The new law both expanded the availability of the federal deduction for charitable donations and limited its value for certain high-earning taxpayers. Starting this year, clients who may not have benefitted from charitable donations since the standard deduction was expanded back in 2018 may once again claim a deduction for charitable donations. Of course, taxpayers will not actually notice the changes until they file their 2026 tax returns early next year—and many may not even be aware that the changes exist. As such, tax planning for charitable donations should be added back to the year-end planning checklist for all clients—and with the end of summer officially behind us, the time to start checking those boxes is now.
Charitable Deductions for Standard Deduction Filers
Since the OBBBA permanently eliminated all miscellaneous itemized deductions and also permanently established the expanded standard deduction, most taxpayers will not return to the days of itemizing tax deductions—meaning that they wouldn't benefit from the itemized deduction for charitable donations.
Now, the OBBBA has created a new charitable deduction for taxpayers who do not itemize deductions. Taxpayers who do not itemize deductions can claim a charitable contributions deduction of up to $1,000 ($2,000 for joint returns). A similar deduction was created during the COVID-19 pandemic era and proved to be widely popular among non-itemizers.
For the charitable donation to qualify, it must be made to a qualified 501(c)(3) charity—contributions to donor advised funds and private foundations do not qualify (this rule doesn't apply with respect to the itemized deduction). The contribution must be made in cash (things like online donations, credit card donations and contributions made by check count as cash donations). As is always the case, the taxpayer must obtain a written acknowledgement from the charity for any donations of $250 or more.
Unlike with the itemized charitable deduction, unused portions of the $1,000 limit cannot be carried forward to future years.
The OBBBA also created a new IRC Section 25F tax credit for individuals who make contributions to eligible scholarship granting organizations (SGOs). The maximum credit is $1,700 per year. Qualifying SGOs fund scholarships for eligible K-12 students, meaning students who (1) are eligible to enroll in public elementary or secondary schools and (2) are members of households with income that does not exceed 300% of the median gross income for the area. Taxpayers who take advantage of the Section 25F tax credit cannot also take the federal charitable deduction for the same contribution. The program begins with respect to contributions made on or after January 1, 2027.
Limitations for High-Earning Taxpayers
The OBBBA also created a new "floor" for taxpayers who itemize and claim the deduction for charitable contributions. Taxpayers who do itemize will only be entitled to deduct contributions to the extent they exceed 0.5% of the taxpayer's adjusted gross income (AGI). Any disallowed portion may be carried forward if the taxpayer has other charitable contribution carry-forwards for the tax year.
This essentially reduces the tax value of smaller charitable donations. For example, with a $100,000 AGI, the taxpayer's floor is $500. If they donated $1,000 over the year, only $500 would be deductible. As was true in the wake of the 2017 TCJA, many high-income taxpayers will be motivated to bunch their donations into a single year in order to maximize the value of the federal tax deduction.
Taxpayers in the top 37% tax bracket are now also subject to a 35% "cap" on the value of their charitable donations for purposes of the federal tax break. The value of the deduction is now limited to 35 cents on the dollar—as opposed to 37 cents on the dollar pre-OBBBA. For example, a $10,000 donation now provides a $3,500 tax break, down from $3,700 pre-OBBBA. This is an overall limitation that applies to the value of itemized deductions in general.
Conclusion
The OBBBA charitable donation changes are expected to have a significant impact during April's tax filing season. Taxpayers should evaluate their giving strategies sooner rather than later to maximize the tax value of their charitable giving this year. Your questions and comments are always welcome. Please post them at our blog, AdvisorFYI, or call the Panel of Experts.