Highlights
- Taxpayers who take the standard deduction are eligible for a new charitable contribution deduction in 2026.
- 2026 tax changes reduce the value of charitable deductions for taxpayers who itemize their deductions, including the new 0.5 percent floor and lower itemized deduction value for high earners, making 2025 a more favorable year for donors to give.
- Strategic planning can preserve deduction value, including accelerating gifts in 2025, bunching contributions through donor-advised funds and using qualified charitable distributions for donors age 70 1/2 or older.
With the end of 2025 quickly approaching, donors and charities alike are preparing for the year-end giving season. This season in 2025 will be a bit different, considering the changes to the charitable income tax deduction on the horizon that are set to go into effect on Jan. 1, 2026.
Donors who itemize their deductions and are considering making a charitable gift will generally receive a better dollar-for-dollar deduction if they contribute in 2025 rather than waiting until 2026 because of the changes that will go into effect in 2026.
Charities may want to capitalize on this change by emphasizing that donors' gifts can have a greater impact on accomplishing charitable missions when received earlier by charities.
Standard Deduction
Many taxpayers switched from taking the itemized deduction to taking the standard deduction when it was increased in 2017 to $12,000 for single filers or those married filing separately and $24,000 for those married and filing jointly. Each year, the standard deduction is adjusted for inflation. The standard deductions for 2025 and 2026 are as follows:
| Standard Deduction Tax Year | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | Heads of Household |
|---|---|---|---|
| 2025 | $15,750 | $31,500 | $23,625 |
| 2026 | $16,100 | $32,200 | $24,150 |
Donors who take the standard deduction in 2025 are not eligible for an additional charitable income tax deduction. Beginning in 2026, however, donors are eligible for up to a $1,000 above-the-line deduction for charitable contributions, even when taking the standard deduction. That amount is increased to $2,000 for married taxpayers filing jointly.
Itemized Deductions
With the increase in the state and local tax (SALT) cap from $10,000 to $40,000 beginning in 2025, more individuals may elect to itemize their deductions. For charitable contributions, however, taxpayers will face limits on charitable deductions in 2026 that do not exist in 2025.
In 2025, taxpayers who itemize their deductions may deduct on a dollar-for-dollar basis contributions made to charitable organizations, up to a certain percentage of their adjusted gross income (AGI) (subject to basis limitations found in Internal Revenue Code Section 170).
The table below summarizes the AGI percentage limitations that apply depending on the asset and type of charitable recipient:
| Asset Class | Private Foundation | Public Charity |
|---|---|---|
| Cash | 30 percent AGI; 5-year carryover | 60 percent AGI; 5-year carryover |
| Ordinary income property | 30 percent AGI; 5-year carryover | 50 percent AGI; 5-year carryover |
| Long-term capital gain property | 20 percent AGI; 5-year carryover | 30 percent AGI; 5-year carryover |
| Short-term capital gain property | 30 percent AGI; 5-year carryover | 50 percent AGI; 5-year carryover |
Charitable Deduction Floor
Beginning in 2026, in addition to the percentage limitations outlined above, charitable deductions will be limited by a 0.5 percent floor. Donors who itemize their deductions will be eligible to deduct only charitable contributions that exceed 0.5 percent of their AGI.
For example, if a donor's AGI in 2026 is $500,000 and that donor contributes $20,000 cash to charity, the first $2,500 (0.5 percent of $500,000) is not eligible for a charitable income tax deduction. As a result, the donor may deduct only $17,500 against the donor's $500,000 gross income.
Typically, charitable income tax deductions that are not able to be deducted in the current year because of AGI limitations may be carried forward to be used in future years for up to five years.
If a donor carries a charitable deduction forward from 2026, any charitable contributions that have already been subject to the 0.5 percent floor in the year of contribution will not be subject to another 0.5 percent limitation. Internal Revenue Code Section 170(d)(1)(C) allows a donor to add the amounts that were subject to the 0.5 percent floor to the excess contributions to be carried forward to prevent applying the 0.5 percent floor to the same charitable contribution multiple times.
For example, if a donor's AGI in 2026 is $500,000 and the donor contributes $400,000 in cash to a public charity, the donor will be eligible for a $300,000 charitable deduction (60 percent of $500,000) less the $2,500 floor for a total of $297,500. In 2027, the donor will carry forward $102,500 of charitable contributions to be applied toward future years ($100,000 excess plus the $2,500 not deductible because of the 0.5 percent limitation). This is because the amounts that are not eligible for deduction due to the floor are added back into the carryforward. As a result, in 2027, if a donor's AGI remains $500,000 and the donor makes no additional charitable contributions, the donor is eligible for a $100,000 charitable deduction ($102,500 less the $2,500 floor).
If a donor carries any charitable deductions forward from 2025, it is likely that those carried forward amounts would be subject to the 0.5 percent floor in 2026 or future years, based on the language in Section 170(b)(1)(I) and 170(d)(1)(C)(i). However, this result is not entirely clear, and it is possible that additional IRS guidance will be issued to the contrary.
Additional Limitation on Itemized Deductions
Beginning in 2026, all itemized deductions will be limited to 35 cents per dollar rather than 37 cents per dollar for taxpayers in the top 37 percent income tax bracket.
This means that charitable deductions for taxpayers who itemize will be further limited. Internal Revenue Code Section 68 requires a taxpayer to reduce all itemized deductions (including charitable deductions) by two-thirty-sevenths of the lesser of 1) all itemized deductions and 2) the amount by which taxable income (increased by itemized deductions) exceeds the dollar amount at which the 37 percent tax bracket begins.
For example, if a donor's AGI is $1 million and the donor contributes $100,000 to charity in 2026, the donor's charitable contribution deduction is limited by the 0.5 percent floor to $95,000 ($5,000 or 0.5 percent of a $1 million floor). The donor's deduction is further limited by two-thirty-sevenths of value of itemized deductions or amount of income subject to 37 percent tax bracket (in this case, limited by two-thirty-sevenths of $100,000, or $5405.41) resulting in a charitable income tax deduction equal to $89,594.59. Amounts subject to this limitation are not eligible to be carried forward.
3 Strategies for Addressing These Changes:
1. Give in 2025
Donors will receive a better dollar-for-dollar deduction in 2025 than they will in 2026. Donors considering making a cash gift to charity may look to accelerate gifts. If a donor has an asset the value of which is anticipated to remain constant between 2025 and 2026, the donor may also consider gifting the asset now.
2. Consider Bunching Contributions
In 2025 or future years, donors may consider bunching their charitable contributions by contributing to a donor-advised fund, giving a larger sum that will cover multiple years of anticipated charitable giving and distributing those annual charitable gift amounts from the donor-advised fund annually.
For example, if a donor typically makes gifts of $20,000 per year to charity, the donor may consider transferring $100,000 to charity (including a donor advised fund) all at once to avoid application of the 0.5 percent floor to each $20,000 amount. Instead, the 0.5 percent floor would only apply once to the full $100,000 amount upon contribution to the donor-advised fund. The donor can then distribute $20,000 per year from the donor-advised fund to charity over the next five years.
Because donors are eligible for a charitable deduction only upon contribution to the donor-advised fund (and not when funds are distributed from a donor-advised fund to another charity), a donor may elect to take the standard deduction or itemized deduction, whichever is more beneficial, in the other years when no funds are contributed to the donor-advised fund, while still fulfilling charitable intentions by making distributions from the donor-advised fund to charity.
3. Give Through IRA-Qualified Charitable Distributions
A donor age 70 1/2 or older may transfer up to $108,000 annually from individual retirement accounts (IRAs) directly to charity. Married couples may annually transfer up to $216,000. These limits are adjusted annually for inflation. The amounts transferred to charity count toward an individual's required minimum distribution (RMD) and are not included in the donor's gross income. Because the distribution is not included in the gross income of the donor the way an RMD is, there is no increase to a donor's Medicare premiums, Social Security tax obligations or the donor's effective tax rate (but note there is no charitable deduction, either). A qualified charitable distribution is most tax-effective when taxpayers reach the age where they are obligated to take an RMD, which is currently age 73.
The distribution must be made by the IRA trustee directly to a "qualified public charity" and does not include a transfer to a donor-advised fund, supporting organization or private foundation (other than operating foundations or pass-through/conduit foundations).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
