What the 2026 charitable deduction changes mean for donors
What the 2026 charitable deduction changes mean for donors
Here is what the 2026 charitable deduction changes mean for donors. Starting in 2026, federal law sets a 0.5%-of-AGI floor on itemized gifts. In addition, top-bracket donors’ deduction value falls from 37% to 35%.
As a result, giving to a donor-advised fund by December 31, 2025 may avoid both limits. However, the gift is irrevocable, and the benefit depends on your bracket and whether you itemize.
How the new AGI floor works
The floor applies to donors who itemize their deductions. In practice, the first 0.5% of your adjusted gross income in charitable gifts no longer produces a deduction. For example, a household with $200,000 of AGI would lose the deduction on its first $1,000 of gifts. Gifts above that amount still count toward itemized deductions.
The effect scales with income. Therefore, a donor with $1 million of AGI would give up the deduction on the first $5,000. In contrast, a household that gives generously relative to its income may barely notice the change. Of course, donors who take the standard deduction do not claim itemized gifts in the first place. The floor matters most to people who itemize every year.
Why the 35% cap matters for top earners
The second change affects donors in the 37% bracket. Previously, each dollar given could reduce their federal tax by up to 37 cents. Starting in 2026, the deduction value for these donors tops out at 35 cents per dollar. For instance, a $100,000 gift that once saved $37,000 in federal income tax would save about $35,000 instead. That gap grows with the size of the gift.
Donors in lower brackets see no change from this cap. Most importantly, the cap and the floor can apply at the same time. As a result, a high-income donor faces a smaller deductible amount and a lower value per deducted dollar. Large gifts planned for 2026 or later deserve a closer look for this reason.
Where a donor-advised fund fits
A donor-advised fund lets you make one contribution now and recommend grants to charities in later years. In other words, you can claim the deduction in 2025 while spreading the actual giving across 2026 and beyond. Advisors often call this approach bunching. The fund can then support the charities you care about on a schedule you recommend.
Timing is the key factor. First, a contribution you complete by December 31, 2025 generally falls under the current rules. Next, grants the fund makes afterward do not create a new deduction for you. The later floor and cap therefore do not shrink the benefit you already claimed. Finally, the fund sponsor takes legal control of the assets once you contribute, so you cannot take the money back.
Before you give: questions to weigh
Understanding what the 2026 charitable deduction changes mean for donors starts with your own tax picture. First, confirm whether you itemize today and whether you expect to itemize in future years. Next, check your current bracket and how your income may shift after 2025. In addition, consider whether you can afford to part with the assets now, since the gift is irrevocable.
Donors who give appreciated stock may face different considerations than those who give cash. Meanwhile, anyone near the standard deduction threshold should model several scenarios. Fortunately, a tax professional can run these numbers against your full return. That review can show whether acting in 2025 makes sense for you.
Above all, what the 2026 charitable deduction changes mean for donors depends on individual circumstances. For some households, the new rules make a 2025 gift more attractive. For others, especially those who do not itemize, the difference may be small.
Our whitepaper on donor-advised funds and the 2025 tax changes covers strategies for acting before year-end. This is education, not tax advice.
