Upcoming Changes to Charitable Deductions in 2026
As part of new tax legislation introduced during President Donald Trump’s administration, there are significant changes on the horizon for charitable deductions that may impact high-income earners starting in 2026. While many taxpayers may enjoy increased tax breaks for charitable contributions in the short term, adjustments to the tax code could lead to less favorable outcomes for some individuals.
Key Adjustments to Charitable Deductions
Beginning in 2026, taxpayers who itemize their deductions will encounter a "floor" for charitable deductions. This means that individuals will be required to exceed 0.5% of their adjusted gross income before being eligible to claim the charitable deduction. This rule imposes a threshold that could lessen the benefits for those who contribute to charitable organizations. Additionally, the new taxation framework places limits on deductions for individuals in the top income tax bracket, specifically those earning 37% or more.
With these changes, taxpayers may want to rethink their charitable contribution strategies well in advance. According to financial experts, the best time to reassess these plans is 2025, when the current, more favorable deduction regulations remain in effect.
Strategic Approaches for Charitable Giving
One proactive strategy that financial planners suggest is “bunching” charitable contributions. This technique involves consolidating multiple years of donations into a single year—2025—to take full advantage of the higher deduction limits. Utilizing a donor-advised fund can serve as an effective way to implement this strategy. These funds allow individuals to make a large donation and receive an immediate tax benefit while having the flexibility to distribute funds to charitable organizations over time.
Moreover, the new legislation introduces a separate charitable deduction for those who do not itemize their deductions, effective in 2026. This deduction allows individuals to claim up to $1,000 for single filers or $2,000 for married couples filing jointly on cash donations. Those who have the option to delay their donations until 2026 might find that simply waiting could yield a beneficial tax advantage.
The Impact on High-Income Earners
Changes to the charitable deduction can have a pronounced effect on wealthy individuals. For instance, a high earner with an adjusted gross income of $1 million who donates $100,000 in 2025 may see a charitable deduction saving of around $37,000. However, due to the aforementioned adjustments, the same donation in 2026 could yield only $33,250 in tax savings.
To break this down, the introduction of the 0.5% floor essentially reduces the taxable income based on the gift amount. For example, after applying the new legislation, the deductible amount from a $100,000 donation drops to $89,864.87, resulting in a $3,750 difference in tax savings compared to the previous year.
This discrepancy isn’t negligible. As financial planner Justin Miller points out, even individuals with substantial incomes are often concerned about preserving every dollar possible, and the simple act of timing donations can make all the difference.
Recommendations for Future Charitable Contributions
In light of these new tax provisions, it’s advisable for high-income earners to consider the timing of their charitable contributions. Strategically placing your donations within the 2025 fiscal year might help maximize tax benefits before stricter regulations come into play.
Financial experts also advocate for setting up donor-advised funds if they haven’t already been established. These funds not only provide immediate tax relief but also enable individuals to extend their philanthropic efforts across multiple years, offering flexibility in charitable planning.
As the 2026 changes loom, being informed and prepared can put taxpayers in a favorable position. Understanding the nuances of these new regulations will allow generous individuals to effectively manage their charitable giving while optimizing their tax liabilities.
