Charitable giving tax considerations for 2026 and beyond

With the One Big Beautiful Bill Act (OBBBA) tax changes now in effect, donors should understand the changes as they plan their philanthropic strategies.

What changed on January 1, 2026

• A new 0.5% floor for itemizers. If you itemize, only the portion of your annual charitable giving that exceeds 0.5% of your adjusted gross income (AGI) is deductible – for example, with $350,000 of AGI, only the gifts made in excess of $1,750 count toward an itemized charitable deduction.
• A new deduction for nonitemizers. Taxpayers who take the standard deduction can now deduct up to $1,000 (single) or $2,000 (married filing jointly) in qualified cash gifts each year – but cash gifts to donor advised funds (DAFs) and most private foundations are ineligible.
• A cap on deduction value for the top bracket. For donors in the 37% bracket, the tax benefit of charitable deductions is now capped at 35%, reducing the value of deductions compared with prior law.
• Corporate giving has a new floor. Corporations may deduct charitable contributions only to the extent they exceed 1% of taxable income, while the traditional overall 10% cap on corporate charitable deductions remains. 

The bottom line: Smaller, routine gifts may no longer move the tax needle for itemizers, while standard deduction filers finally get a modest, permanent tax break for direct cash giving.

For itemizers: Make the 0.5% floor the starting point of your plan

1. Bunch to clear the floor – optionally via a DAF. Combining two or more years of giving into a single tax year can help you exceed the 0.5% threshold, and contributing to a DAF lets you take the deduction in the “bunch” year while recommending grant distributions to charity over time.
2. Be conscious of the 35% cap if you’re in the top bracket. High income donors should recalibrate after-tax cost expectations. Each donated dollar yields at most a 35-cent federal tax benefit in 2026 for top-bracket filers (state rules vary).
3. Use appreciated assets where it fits your plan. Donating long-term appreciated securities can help you reach the floor efficiently while potentially avoiding capital gains – an approach many providers continue to endorse within the new landscape.
4. Coordinate large gifts with other deductions. Because only amounts above the floor are deductible, align major gifts with higher deduction years (e.g., large medical or SALT years where you already itemize). 

DAFs remain deductible for itemizers under the new rules (subject to the 0.5% floor and other longstanding AGI limits on charitable contributions – 60% AGI max on cash gifts and 30% AGI max on appreciated asset gifts).

Practical tip: If most of your annual giving is small dollar and you usually take the standard deduction, you may now get a guaranteed, modest tax benefit – just ensure your gifts are cash and made directly to eligible charities.

For corporations: Plan around the 1% floor and 10% cap

• Since only the portion above 1% of taxable income is deductible, consider bunching multi-year gifts or using a corporate DAF to make a single, larger, deductible contribution in 2026 and grant out over time.
• Model the after-tax cost of your annual giving under the new floor. For companies that historically give approximately 3% of taxable income, roughly the first third of that budget is no longer deductible post tax law change.

Powerful exception: Qualified Charitable Distributions (QCDs) from IRAs

If you’re age 70½ or older, you can direct IRA dollars straight to charity and exclude the amount from income, bypassing the 0.5% floor and helping manage AGI-sensitive items like Medicare premiums. 

• 2026 QCD limit: Up to $111,000 per person (indexed for inflation) can be given tax-free from IRAs in 2026. Spouses can each make QCDs from their own IRAs. A onetime QCD up to $55,000 (indexed for inflation) to fund a charitable gift annuity (CGA) or charitable remainder trust (CRT) is also still permitted.
• Eligibility & mechanics: You must be 70½ on the date of the transfer. Funds must move directly from the IRA custodian to a qualified charity. DAFs and private foundations do not qualify as eligible charitable recipients. 

Why QCDs matter now: Because the gift never hits AGI, QCDs can be more valuable than itemized deductions – especially in a world where many donors won’t clear the 0.5% floor each year.

How DAFs fit in – 2026 and beyond

• Itemizers: DAF contributions remain deductible in the year of contribution, helping you bunch gifts to exceed the floor while recommending grants over time.
• Non‑itemizers: The new $1,000/$2,000 non‑itemizer deduction does not apply to DAF contributions. Direct cash gifts are required for that benefit. 

For donors focused on long-term flexibility, a DAF can still centralize giving, enable investment growth for philanthropy, and simplify recordkeeping under the new rules. 

2026 playbook: Consider these suggestions

• Calculate your 0.5% floor. Multiply AGI by 0.005 to find your nondeductible charitable “hurdle,” then decide whether to bunch or to give every year.
• Gift the right asset – not just any asset. Gifts of appreciated securities and real assets can help you exceed the floor more efficiently than cash gifts, while potentially avoiding capital gains.
• Standard-deduction filer? Plan your $1,000/$2,000 direct cash gifts, keep receipts, and consider automating monthly contributions that total your target by year-end.  
• Over 70½? Evaluate QCDs to meet some or all of your charitable goals and, if needed, satisfy RMDs without raising AGI.
• Business owners: Revisit corporate giving budgets and consider a corporate DAF to bunch contributions above the 1% floor while staying under the 10% cap.  

What the new tax law means for your 2026 giving strategy

The new framework doesn’t reduce the impact of your generosity – it changes where the tax benefits show up and how best to coordinate them with your broader financial picture. By thoughtfully using tools like DAFs and QCDs, aligning timing with the 0.5% floor, and steering non‑itemizer cash gifts directly to eligible charities, you can support the causes you care about while maintaining tax efficiency under the rules now in force.