How Upcoming Tax Law Changes Could Affect Charitable Giving

Charitable giving is about to become more complex. Beginning in 2026, new tax rules will change how deductions work for millions of Americans. These adjustments—part of the recently passed One Big Beautiful Bill Act—introduce new benefits for some taxpayers, reduce deductions for others, and generally complicate how charitable contributions are treated under the tax code.

Although the changes won’t take effect until next year, this is an ideal time to review your giving strategy, and planning ahead can help maximize both your charitable impact and tax efficiency.

A Closer Look at the Changes

To understand what’s shifting, it helps to revisit the 2017 tax overhaul. That law nearly doubled the standard deduction and capped the deduction for state and local taxes (SALT) at $10,000. As a result, many taxpayers stopped itemizing and began claiming the standard deduction, which meant there was no longer a tax advantage for charitable contributions.

Between 2017 and 2019, itemized charitable deductions fell by more than $60 billion. The upcoming changes attempt to make charitable giving more accessible to non-itemizers, while also introducing new limitations for itemizers.

Charitable Deduction for Non-Itemizers

Starting in 2026, taxpayers who take the standard deduction will be able to claim a limited charitable deduction:

• Up to $2,000 for married couples filing jointly
• Up to $1,000 for single filers

There are key restrictions:

• Only cash donations qualify; contributions of property or stock are excluded
• Gifts must go to qualified public charities (such as schools or churches)
• Donor-advised funds and supporting organizations are not eligible

This deduction reduces taxable income, but not adjusted gross income (AGI). This is important, because many other tax rules—like Medicare IRMAA premiums, Roth IRA income limits, and the 3.8% net investment income tax—are all based on AGI, not taxable income.

New Limits on Itemized Deductions

Also beginning in 2026, a new rule reduces allowable charitable deductions for those who itemize by 0.5% of their adjusted gross income. That means that a household with $225,000 in AGI would lose $1,125 from their deductible total and $2,000 of charitable gifts would result in only $875 being deducted.

This fixed reduction makes smaller, regular contributions less efficient from a tax perspective. Some may benefit from bunching their donations—giving more in fewer years—to reduce the impact of the disallowance.

High-Income Earners Face Additional Limits

Top-bracket taxpayers will also face another change in 2026. Itemized deductions will be capped at 35%, rather than the top marginal rate of 37%. This affects:

• Joint filers earning over approximately $752,000
• Single filers earning over approximately $626,000 (Thresholds will adjust with inflation in 2026)

This limitation is in addition to the 0.5% AGI reduction. It will particularly affect high-income individuals who already see limited benefit from deductions due to the SALT cap.

Although the SALT deduction cap will rise to $40,000 in 2026, top-bracket taxpayers won’t benefit due to income phaseouts. Combined with the 0.5% AGI floor and the 35% deduction cap, this makes charitable giving even less tax-efficient for high earners.

Strategic Giving Opportunities

With these changes on the horizon, donors may want to revisit their charitable giving plans. A few strategies to consider:

• Make larger gifts in 2025: Accelerating donations may help maximize tax benefits under current rules, especially for high earners.
• Use qualified charitable distributions (QCDs): Taxpayers age 70½ and older can donate directly from a traditional IRA. QCDs do not count toward AGI and are not affected by the upcoming deduction limits.
• Reevaluate whether to itemize: With a new deduction available to non-itemizers, some may benefit from sticking with the standard deduction, while others may benefit more from bunching deductions and itemizing every few years.
• Complete property donations before year-end: Since the new deduction only applies to cash gifts, those planning to donate items like clothing or furniture may want to accelerate and make the donation in 2025.

Looking Ahead to 2026

The new rules are intended to expand access to charitable deductions while limiting high-income tax benefits—but they also add layers of complexity. For many taxpayers, small adjustments to timing or strategy can make a meaningful difference in the long-term value of their giving.

LMC closely monitors changes in tax legislation to help clients plan with confidence. If you have questions about how the new provisions may affect your charitable giving strategy, please reach out to your LMC professional.