Charitably inclined? The rules are changing for deducting donations

Tyler Kert
Tamarack Wealth Management

Giving is a great practice to implement. There are so many benefits to giving. It brings you happiness, lifts others up, and allows you to be part of something bigger than yourself. On top of all that, giving can have a positive effect on your tax return. But, starting in 2026 the tax rules around charitable giving are going to change. The One Big Beautiful Bill Act (OBBBA), signed into law this past year, could affect how much of your gift is actually deductible. Whether you give on a regular basis, or make infrequent large gifts, tax-planning just became more important.

Beginning in 2026, taxpayers who take the standard deduction will be allowed an above-the-line deduction for cash gifts to qualifying public charities: up to $1,000 for single filers and $2,000 for married couples filing jointly. That’s a reversal of the post-TCJA (Tax Cuts Jobs Act of 2017) world where most taxpayers who didn’t itemize got no tax benefit for cash donations at all. If you’re in the habit of taking the standard deduction, you may have stopped tracking your giving. Starting in 2026, however, you can take the standard deduction and also take a small charitable contribution deduction on top of that.

While the OBBBA makes smaller deductions available to many who weren’t previously receiving a tax benefit, it also tightens things for larger donors who itemize. Starting in 2026 the OBBBA imposes a new floor: the first 0.5 percent of your adjusted gross income in charitable gifts will generally be nondeductible. For example, a household with $500,000 of AGI will lose the tax benefit on the first $2,500 of donations before any normal percentage limits or caps even apply. If you’re a very high earner, the law also effectively reduces the tax value of a dollar donated if you’re in the top bracket; donations that in 2025 might have reduced tax liability at 37 cents on the dollar will be capped at a 35-cent benefit in 2026. Those two changes together shrink the tax benefit for large donations and make planning around throughout the year worth thinking about.

Businesses aren’t immune from the new rules either. Corporations face their own floor. Beginning in 2026, corporate charitable deductions are allowed only to the extent contributions exceed 1 percent of taxable income. Smaller corporate gifts that fall under that 1 percent floor will be nondeductible, so companies that have relied on modest local giving as a routine deductible expense should take note and consider consolidating or timing their gifts differently.

So what should you do before the end of the year? Well, 2025 is the year to act before the rules change. If you’re planning a large gift, doing it in 2025 locks in the better tax treatment that still applies this year. If 2025 is going to end before you can give your large gift, you might consider a strategy called “bunching”. Basically, you take your regular charitable donations and group them together into a single year to maximize your deduction. Then, in the off years, just take the standard deduction along with your small charitable deduction amount that is now allowed ($1,000 single; $2,000 married filing jointly). This strategy can help maximize your tax benefit if you consistently fall just short of itemizing your deductions. 

The bottom line is this: the OBBBA doesn’t eliminate incentives for giving, but it does change how those incentives look. For most people, the practical takeaway is to be intentional. These changes, along with many others that the OBBBA introduced, have added yet another layer of job security to tax professionals. As the rules become increasingly complex, tax planning becomes that much more critical to your financial success. It is in your best interest to talk to a trusted advisor and see how these changes will directly impact your situation. The laws can reshape the deduction math, but they don’t change the facts about charitable donations. Giving is worth it even without a tax deduction. That said, with a little planning, you can keep giving meaningfully while also maximizing your tax benefit.

This material is for informational purposes only and does not constitute financial, investment, or tax advice. Please consult your tax advisor or financial planner to discuss your specific circumstances before making any decisions. Securities offered through Cetera Wealth Services LLC, Member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.

Tyler Kert, a licensed financial advisor and CPA, provides financial planning and tax consulting services at Tamarack Wealth Management in Cashmere, WA.