Significant Changes Ahead for Charitable Contribution Deductions

Changes to rules governing the deductibility of charitable contributions will take effect in 2026, impacting both individual taxpayers and tax-exempt organizations. Under new regulations enacted as part of President Donald Trump‘s tax and spending package, taxpayers who take the standard deduction will be able to deduct larger cash gifts, while itemizers will face new limits.

Increased Deduction for Non-Itemizers

Starting in 2026, individuals who take the standard deduction will have the opportunity to deduct up to $1,000 in cash donations to qualifying 501(c)(3) charities. For married couples filing jointly, this limit will be $2,000. This change marks a significant increase from the previous allowance of $300 for individuals and $600 for joint filers, which was temporarily in place during the early pandemic years but has since expired.

According to Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, it is important to note that these deductions apply exclusively to direct cash gifts and do not extend to donor-advised funds or private foundations.

New Limits for Itemizers

For taxpayers who opt to itemize their deductions, the 2026 changes will introduce a new threshold: cash contributions can only be deducted to the extent that they exceed 0.5% of the taxpayer’s adjusted gross income (AGI). For instance, if a taxpayer’s AGI is $100,000, they will be able to deduct only the amount of their cash gifts that surpass $500 (0.5% of $100,000). If they contribute $2,000, only $1,500 would be deductible.

Additionally, existing rules that limit itemizers’ deductions will remain in effect. Currently, taxpayers cannot deduct cash donations exceeding 60% of their AGI in a given year, a limit that is 30% for gifts made to donor-advised funds and private foundations. Taxpayers can carry forward excess contributions for up to five years, allowing them to deduct amounts that exceed the AGI limits in subsequent tax years.

O’Saben emphasized that taxpayers who choose to itemize their deductions will not be eligible for the new standard deduction of $1,000 or $2,000 as it is reserved for non-itemizers.

Impact on High-Income Filers

The new regulations also include provisions impacting high-income earners. For individuals in the top tax bracket of 37%, the value of charitable deductions will effectively be capped at the 35% tax rate. For example, if an itemizer is allowed to deduct $10,000 in cash donations, instead of receiving a tax reduction of $3,700 (37% of $10,000), they will only see a reduction of $3,500 (35% of $10,000).

Furthermore, non-cash contributions, such as clothes or household goods, will also be subject to the new 0.5% of AGI floor for itemizers. Taxpayers taking the standard deduction will not be able to deduct any non-cash contributions, as the increased limit applies solely to cash gifts.

These changes represent a significant shift in how charitable donations will be treated for tax purposes, affecting the financial landscape for both taxpayers and the charities that rely on their support. As 2026 approaches, individuals are encouraged to review their giving strategies and consult with tax professionals to navigate the new rules effectively.