Charitable Deduction Rules are Changing
The One Big Beautiful Bill Act, signed into law on July 4, 2025, brought a host of changes to the tax code. Many of these changes applied to 2025 tax returns, while others do not take effect until the upcoming 2026 filing season. Among the new changes are revisions to the charitable deduction rules. For some taxpayers, these revisions will increase the charitable deduction; for others, they will reduce it. The new rules are summarized below with potential tax strategies to minimize your tax liability.
Charitable Deduction for More Taxpayers
What’s Changing: In layman’s terms, if you file a tax return and give to a qualified charity in 2026, you will most likely be eligible for some kind of charitable deduction. In prior years, charitable deductions were only available to taxpayers who itemized their deductions (did not take the standard deduction). With the standard deduction being so high, a significant number of taxpayers were taking the standard deduction and therefore unable to receive any added tax benefit from their charitable giving. New for the 2026 tax year is an above-the-line charitable deduction for taxpayers who take the standard deduction. Single taxpayers, who take the standard deduction, may deduct up to $1,000 of charitable cash giving, on top of the standard deduction. Married filing joint taxpayers may deduct up to $2,000. Depending on what tax bracket you fall in, this could save several hundred dollars in taxes on your next tax return.
What to do about it: Make sure to keep track of your donation receipts to qualified charities this year, as you will most likely be eligible for some benefit, even if you haven’t been in the past.
New Charitable Limitations for Itemizers
What’s Changing: On the down side, taxpayers who itemize their deductions in 2026 are subject to two new limitations on the total charitable deduction amount they are allowed to deduct. The first limitation: only charitable giving that exceeds 0.5% of a taxpayer’s adjusted gross income (AGI) is eligible to be deducted. For instance, if a taxpayer’s AGI is $200,000, the first $1,000 of charitable giving is disallowed as a deduction. The second limitation: the value of the charitable deduction for high-income taxpayers, in the highest 37% tax bracket, is limited to a maximum tax savings of 35% rather than a 37% tax savings. For instance, a $100,000 charitable donation would typically save a taxpayer, in the 37% tax bracket, $37,000 in taxes. That savings is now reduced to $35,000.
What to do about it: One potential way to avoid these new limitations is through the use of a Qualified Charitable Distribution (QCD). To make a QCD, you must be 70.5 years of age or older and have an IRA. If you find yourself in that demographic, you can give directly from your qualified IRA to a qualified charitable organization and receive a non-limited deduction for the full donation amount (even if you take the standard deduction), up to $111,000 for 2026.
Have any further questions?
Feel free to reach out to Atlantic Edge Accountings Services or your trusted tax advisor to see how these changes could impact your unique tax situation.
Please note that the advice above is general in nature and may or may not be applicable to your unique situation. It’s always a good idea to consult with your tax advisor to ensure that all aspects of your situation are accounted for.