OBBBA Changed Charitable Giving Rules: What's New for 2026

#What changed

OBBBA’s charitable giving provisions affect three distinct groups of taxpayers differently. Most changes hit in 2026 — meaning 2025 was a planning sweet spot for accelerating contributions.

#Change 1: Above-the-line deduction for non-itemizers (2026)

Beginning in 2026, taxpayers who take the standard deduction can also deduct up to:

• $1,000 single / Head of Household
• $2,000 married filing jointly

…of qualified cash charitable contributions, in addition to the standard deduction.

This is a real change. Before OBBBA, non-itemizers got zero charitable tax benefit (other than a brief 2020-2021 COVID-era $300/$600 above-the-line deduction). Now non-itemizers get up to $1K/$2K of bonus deduction for cash gifts to qualifying charities.

For ETS-client families who don’t itemize (typical scenario: $30K MFJ standard deduction + $8K SALT + $3K mortgage interest = $11K of itemized doesn’t beat $30K standard), this captures a charitable tax benefit that was previously zero. Useful for families that give moderate amounts to charity but don’t have the deduction stack to itemize.

#Change 2: 0.5% AGI floor on itemized charitable deductions (2026)

Beginning in 2026, itemizers face a new floor on their charitable deduction. The first 0.5% of AGI of charitable gifts doesn’t count — only gifts above that floor are deductible.

Example: $400,000 AGI couple, $5,000 of annual charitable gifts in 2026.

• AGI floor: 0.5% × $400,000 = $2,000
• Charitable gifts: $5,000
• Deductible amount: $5,000 - $2,000 = $3,000

Example: $400,000 AGI couple, $1,500 of annual charitable gifts in 2026.

• AGI floor: 0.5% × $400,000 = $2,000
• Charitable gifts: $1,500
• Deductible amount: $0 (gifts below the floor)

For larger gifts, the floor is a small fraction. For smaller gifts, the floor can wipe out the entire deduction.

For ETS clients who give modest annual amounts ($1K-$3K) to multiple charities, the AGI floor may eliminate the charitable deduction entirely in 2026 unless gifts are aggregated above the floor.

#Change 3: 35% cap on itemized charitable benefit for top-bracket filers (2026)

Beginning in 2026, taxpayers in the 37% top federal bracket face a cap on the tax benefit of itemized charitable deductions at 35%.

This is a complex provision. The mechanical effect: for a top-bracket donor who gives $100K to charity:

• Pre-OBBBA: deduction reduces taxable income by $100K × 37% marginal rate = $37K of tax savings
• Post-OBBBA (2026): deduction is capped at 35% marginal benefit, regardless of bracket = $35K of tax savings
• Reduction: ~$2K per $100K of charitable gift for top-bracket donors

For very high-income, high-giving households ($1M+ giving), this cumulative reduction matters. For more moderate income / giving, the cap is academic.

#What this means for ETS clients

#For non-itemizing families (60%+ of ETS clients)

Good news: the new $1K/$2K above-the-line deduction is pure additional benefit starting 2026. Capture by tracking cash donations during the year.

Action: keep documentation (receipts, bank records, donor statements) for all charitable cash gifts going forward. Above-the-line means you don’t need to itemize, but you do need to substantiate.

#For itemizing households below the 37% bracket

The 0.5% AGI floor affects you. If your annual charitable giving is below 0.5% of AGI, your deduction goes to zero in 2026.

Action items:

1. Aggregate giving to exceed the floor where possible
2. Bunch contributions in alternating years (skip a year of giving, double the next year)
3. Use a Donor-Advised Fund (DAF) to contribute a multi-year sum in a single year (above the floor) and then distribute to charities over time

#For top-bracket itemizing households ($800K+ AGI typically)

The 35% benefit cap affects you. For very large gifts, the per-dollar tax benefit is reduced from 37 cents to 35 cents — a 5% reduction in deduction value.

Action items:

1. Consider 2025 acceleration — gifts in 2025 weren’t subject to the cap. If you missed this, the move’s gone.
2. Continue strategic gifting — the cap reduces benefit but doesn’t eliminate it. Charitable strategies still work, just slightly less tax-efficiently.
3. Layer with appreciated assets — gifting appreciated stock (deduct FMV + avoid capital gains) still works under post-OBBBA rules.

#For ETS clients planning bequests / estate gifts

Estate-related charitable gifts (Charitable Lead Trusts, Charitable Remainder Trusts, direct bequests, qualifying retirement-account beneficiary designations) follow different rules than annual charitable income tax deductions. The OBBBA changes affect the annual income tax deduction; estate charitable rules are separate.

#Planning moves under post-OBBBA charitable rules

Move 1: Document everything starting 2026. The 0.5% AGI floor and the new above-the-line deduction both require documentation. Bank records, donor confirmation letters, IRS-acceptable receipts.

Move 2: Bunch + DAF for itemizers. The classic “bunching” move (concentrate two-year giving in one year, take standard deduction in the off year) becomes more important under the 0.5% AGI floor. DAFs facilitate by letting you bunch contributions but distribute to actual charities over time.

Move 3: Direct stock gifting for high-income donors. Donating appreciated stock to charity (rather than cash) gives you a deduction at FMV + avoids capital gains tax on the appreciation. Still works under post-OBBBA rules. For top-bracket donors hit by the 35% cap, the cap-gains avoidance is now relatively more valuable.

Move 4: Qualified Charitable Distributions (QCDs) for seniors 70½+. QCDs from IRAs (up to $108K/yr in 2025, indexed for inflation) go directly to charity and don’t count as taxable income. They satisfy RMD requirements. Not affected by the 0.5% AGI floor or 35% cap. Strong move for older taxpayers with RMD income they don’t need.

Move 5: Re-evaluate your overall giving strategy in light of the changes. Some donors’ annual charitable giving was effectively encouraged by the tax deduction. Post-OBBBA, the marginal incentive is slightly reduced. The philanthropic motive remains; the tax efficiency landscape shifted.

#Common questions

When do the new rules take effect? Most changes are effective for tax year 2026. The 2025 tax year was largely under pre-OBBBA rules (no AGI floor, no 35% cap, no above-the-line for non-itemizers).

What if I made gifts in 2025? 2025 gifts were subject to pre-OBBBA rules — no floor, no cap. For top-bracket donors, this made 2025 a great year to accelerate charitable giving.

Does the 0.5% AGI floor apply to all charitable deductions or just cash? It applies to itemized charitable deductions broadly (cash, property, appreciated assets). The first 0.5% of AGI of itemized charitable gifts is below the floor regardless of gift type.

Does the $1K/$2K above-the-line deduction apply to property donations? No — only to cash donations to qualifying charities. Property donations (used clothing, household items) still go through Schedule A itemization.

Can I claim both the above-the-line $1K/$2K AND itemize? No. The $1K/$2K is for non-itemizers. If you itemize charitable contributions on Schedule A, you don’t also get the above-the-line bonus.

What about Donor-Advised Funds? DAFs work the same way — you take the charitable deduction in the year you contribute to the DAF (subject to the 0.5% AGI floor and 35% cap rules). The DAF then distributes to actual charities over time.

Are QCDs affected? No. QCDs from IRAs are excluded from gross income (not deductible from AGI), so the 0.5% floor and 35% cap don’t apply. QCDs remain the most tax-efficient way for seniors 70½+ to give to charity.

Will Congress modify these rules before 2026? Possible but unknown. Plan with current rules in mind; adjust if Congress acts.

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If your charitable giving is meaningful (or you’re considering increasing it), the Discovery call is the right next step. We model post-OBBBA charitable strategy as part of every Tax Analysis engagement.