President Trump’s tax and spending package, enacted in July 2025, introduces significant changes to how taxpayers can claim charitable deductions starting in 2026, creating new considerations for year-end tax planning.
For taxpayers who do not itemize deductions, the legislation establishes a new non-itemizer charitable deduction worth up to $1,000 for single filers and $2,000 for married couples filing jointly. This provision allows individuals who previously received no tax benefit from charitable contributions to claim a deduction on cash gifts to eligible tax-exempt organizations. Financial advisors note this represents a meaningful opportunity for many donors, as the deduction can reduce tax liability proportionally based on an individual’s tax bracket.
However, for households that itemize their deductions, two new provisions may reduce charitable tax benefits. First, the legislation introduces a 0.5% floor based on adjusted gross income, below which charitable donations cannot be deducted. This means income increases from sources such as asset sales, Roth conversions, or bonuses will automatically raise this floor, potentially eliminating deductions for donors who do not increase their giving. Second, the law caps the charitable deduction at 35% for taxpayers in the highest federal income tax bracket, despite their 37% marginal rate, thereby limiting the relative value of their charitable gifts.
Financial planners recommend several strategies to navigate these changes. Donor-advised funds remain useful vehicles, allowing taxpayers to make large gifts in a single year using a “bunching” strategy while distributing donations gradually. Additionally, strategic selection of which investments to donate—particularly long-term capital gains assets held longer than one year—can provide greater tax benefits than donating cash or short-term holdings. Experts emphasize that proactive planning during 2026 can help taxpayers optimize their charitable contributions despite the new restrictions.
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