How the New Tax Bill Changes Charitable Giving Strategy: 4 Key Updates for 2026

If you've been making charitable donations but haven't been able to deduct them on your taxes, that's about to change. The One Big Beautiful Bill Act recently passed, and the changes starting in 2026 could transform the way you give to charity - either saving you thousands or costing you money if you don't adapt your strategy.

Since the 2017 tax law raised the standard deduction, about 90% of households stopped itemizing their deductions, meaning about 90% of charitable donors completely lost their tax benefit from giving to charity. The new legislation addresses this while also creating new challenges for certain donors.

The Four Key Changes You Need to Know

Change #1: Increased State and Local Tax Deduction Cap

The state and local tax (SALT) deduction cap has increased from $10,000 to $40,000 for taxpayers with incomes under $500,000. This higher SALT deduction might push more people over the standard deduction threshold, making them itemizers again.

If you become an itemizer because of the higher deductions, your charitable gifts become fully deductible again (subject to income caps). This means you might not need to use aggressive bunching strategies anymore.

Change #2: Universal Charity Deduction for Non-Itemizers

Starting in 2026, taxpayers who take the standard deduction can deduct $1,000 (single filers) or $2,000 (married filing jointly) in charitable donations.

The requirements:

• Must be cash gifts (not appreciated stock)
• Must be made directly to qualified operating charities
• Cannot be given to donor-advised funds

This is essentially free money from the government for doing something you're already doing. If you're charitably inclined and take the standard deduction, consider contributing the full allowable amount each year.

Change #3: New Deduction Floor (0.5% of AGI)

Starting in 2026, itemized charitable deductions only apply if your total donations exceed 0.5% of your adjusted gross income (AGI). If your AGI is $200,000, only gifts above $1,000 would be deductible.

The Solution: Bunching Strategy

Instead of giving $5,000 per year every year (where you won't get to deduct the first $1,000-$3,000), consider giving $25,000 in year one and nothing in years two through five.

You can still donate consistently to charities by contributing that $25,000 to a donor-advised fund and maintaining your same $5,000 annual gifts to charities. You get a bigger deduction, avoid the floor, but the charities never feel the difference.

Change #4: Reduced Deduction Cap for High Earners

Starting in 2026, taxpayers in the top federal income tax bracket will see their charitable deduction benefit capped at 35% (down from 37%). This affects households with roughly $700,000 or more of taxable income for married filing jointly.

Real Example: The $10,000 Difference

Consider a married couple with $1.2 million AGI wanting to donate $200,000 to charity:

Example assumes married filing jointly with $1.2M AGI and top tax bracket. New 2026 rules include 0.5% AGI floor and 35% benefit cap.

You can carry forward any unused charitable deductions to future years, but the immediate benefit in 2026 will be significantly reduced for high-income donors.

Strategic Actions to Consider

For Small Donors: Take advantage of the new universal deduction by making $1,000 (single) or $2,000 (married) in cash donations directly to qualified charities each year.

For High Earners: If you're planning a large charitable donation, consider completing it before December 31, 2025, to capture the full 37% tax benefit.

For Everyone Else: Consider bunching several years of donations into one tax year to clear the new 0.5% AGI floor, potentially using a donor-advised fund to maintain consistent giving to your favorite charities.

The families who adapt to these changes early will have a significant advantage. The most important deadline to remember is that things change after 2025 - December 31st could be the last year where high earners get the full 37% deduction.

If you want to learn more about how these strategies could apply to your specific situation, click here to learn more about our systematic financial planning process.

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-A note from Bjorn Amundson, CFP®

This material is intended for educational purposes only. You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. Nothing contained in the material constitutes a recommendation for purchase or sale of any security, investment advisory services or tax advice. The information and opinions expressed in the linked articles are from third parties, and while they are deemed reliable, we cannot guarantee their accuracy.