President Donald Trump’s tax legislation, enacted in July 2025, introduced significant changes to how charitable deductions function for taxpayers filing returns in 2027 and beyond. The modifications affect both those who itemize deductions and those who take the standard deduction, creating a more complex tax planning landscape as the year progresses.
For filers who do not itemize deductions, the law introduced a new charitable deduction worth up to $1,000 for single taxpayers and $2,000 for married couples filing jointly in 2026. This provision allows taxpayers to claim a deduction for cash contributions to eligible tax-exempt organizations without itemizing, representing a tax benefit for individuals who previously received no deduction for charitable gifts. Financial planners note this change provides meaningful relief for many donors making smaller contributions.
However, the legislation also imposed restrictions on taxpayers who itemize their deductions. Starting in 2026, a “floor” limits charitable deductions to amounts exceeding 0.5% of adjusted gross income. This means that income increases from bonuses, asset sales, or Roth conversions can raise the threshold amount and reduce the deductible portion of charitable gifts. For example, a $400,000 AGI with a $10,000 donation would have a $2,000 floor, but if income rises to $500,000, the floor increases to $2,500.
Additionally, taxpayers in the highest federal income tax bracket face a 35% cap on their charitable deduction value, down from their 37% marginal tax rate. This combination of changes has prompted financial advisors to recommend proactive planning strategies. Recommended approaches include using donor-advised funds to “bunch” multiple years of charitable gifts into a single year for an upfront deduction, and employing “tax lot selection” strategies that prioritize donating long-term capital gains assets over cash to maximize tax efficiency.
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