New Limits on Charitable Deductions
Starting with 2026 tax returns, many taxpayers who itemize deductions may receive a smaller charitable deduction than they expect.
A new tax law requires individuals who itemize to subtract 0.5% of Adjusted Gross Income (AGI) before claiming a charitable contribution deduction.
How the New Law Works
Beginning in 2026, only the portion of charitable contributions that exceeds 0.5% of your AGI is deductible. This creates a new threshold that reduces the deductible amount of many charitable gifts.
Example:
AGI: $200,000
• 0.5% of AGI = $1,000
• Charitable gifts = $5,000
• Deductible amount = $4,000
The first $1,000 of contributions is not deductible.
This Law Is Separate from Existing AGI Limits
Taxpayers may confuse the new 0.5% AGI floor with the long-standing limits on charitable deductions. They are different rules and both may apply.
• The new 0.5% AGI floor reduces the amount of contributions that can be deducted.
• The existing AGI percentage limits (such as the 60% of AGI limit for many cash gifts to public charities) continue to limit the maximum deduction that can be claimed.
In other words, itemizing taxpayers must first reduce their deduction by the new 0.5% floor, and then the remaining deduction is still subject to the applicable AGI limits.
Who Is Affected?
This change affects taxpayers who itemize deductions on Schedule A and make gifts to qualified charitable organizations. Taxpayers claiming the standard deduction are not subject to the 0.5% floor.
Why This Matters
Many generous donors will receive a smaller tax benefit than in prior years. Thoughtful year-end planning can help maximize the value of charitable giving.
Planning Opportunities
- Bunch several years of charitable gifts into one year.
- Donate appreciated securities instead of cash when appropriate.
- Use Qualified Charitable Distributions (QCDs) if you qualify.
- Coordinate charitable giving with your overall tax strategy.
Don't Let the New Law Surprise You
Charitable giving should always begin with supporting causes you care about, but understanding the new rules can help you receive every deduction available. If you expect to itemize deductions, review your charitable giving strategy before year-end.
Questions? Let’s Talk!
Contact GurelCPA. We can help you build a charitable giving strategy that supports both your favorite charities and your tax planning goals.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique.