President Trump’s tax and spending legislation, enacted in July 2025, made significant changes to how charitable deductions work for taxpayers beginning in 2026. The changes affect both those who itemize deductions and those who do not, creating a more complex tax landscape that advisors say requires proactive planning.
For taxpayers who do not itemize their deductions, the new law introduces a beneficial provision allowing a charitable deduction of up to $1,000 for single filers and $2,000 for married couples filing jointly. This applies to cash contributions to eligible tax-exempt organizations. Previously, such taxpayers received no tax benefit from charitable giving. Financial advisors note this represents a meaningful opportunity for donors who give smaller amounts.
However, the legislation includes two significant changes for households that itemize deductions. First, a new “floor” requirement means charitable deductions only become available once gifts exceed 0.5 percent of a taxpayer’s adjusted gross income. This floor did not exist under prior law. An increase in income from various sources—such as asset sales, Roth conversions, or bonuses—raises this threshold, potentially reducing the value of the same charitable contribution. Second, for taxpayers in the top federal income bracket paying a 37 percent marginal tax rate, the charitable deduction is capped at 35 percent, limiting tax benefits for high-income donors.
Tax professionals recommend several strategies to navigate these changes. Donor-advised funds, which work like charitable checkbooks, allow taxpayers to make large gifts in a single year and then distribute funds gradually over time, potentially capturing a larger deduction. Tax lot selection—choosing which specific assets to donate based on tax consequences—can also improve outcomes. Advisors particularly recommend donating long-term capital gains assets owned for more than one year, which provide larger tax breaks than cash or short-term holdings. Financial planners emphasize that despite the new constraints, substantial planning opportunities remain available through the end of the year.
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