Charitable Contribution Deduction: Maximizing Your Tax Benefits

February 16, 2026

By: Laurie Smith

Partner, Tax

Key Takeaways

New 0.5% AGI floor starting 2026: Donations below this threshold won’t be deductible for itemizers—forcing strategic bunching strategies
Non-itemizer deduction created: Up to $1,000 ($2,000 joint filers) now deductible even without itemizing, expanding charitable incentives
Top bracket deduction limitation: High earners face 35% cap instead of 37% on itemized deduction value starting 2026

Congress just rewrote the charitable deduction playbook. The One Big Beautiful Bill Act (OBBBA) passed in July 2025 creates new floors, caps, and limitations that fundamentally alter how donations generate tax benefits—particularly for high-net-worth individuals who’ve relied on charitable strategies for decades.

The changes don’t just affect what you can deduct. They alter when you should give, how much provides optimal tax benefit, and whether itemizing even makes sense anymore.

Here’s what actually changed and what you need to know to plan accordingly.

The New 0.5% AGI Floor: Small Donations Stop Counting

Starting in 2026, itemizers face a new hurdle: only charitable donations exceeding 0.5% of adjusted gross income qualify for a deduction.

Practical impact: If your AGI is $500,000, the first $2,500 in donations produces zero tax benefit. Only amounts above $2,500 generate deductions. For donors with $1 million AGI, the first $5,000 in gifts is effectively non-deductible.

This creates a fundamental shift in giving strategy. Regular monthly donations of $200-500 that previously generated consistent tax benefits now require bundling into larger annual gifts to clear the threshold.

An executive with $800,000 AGI who donates $500 monthly to various causes—$6,000 annually. Under previous rules, the full $6,000 was deductible. Starting 2026, only $2,000 counts (after the $4,000 floor from $800K x 0.5%). Their effective deduction drops 67% despite identical giving.

Strategic response: Donation bunching becomes essential. Instead of giving $6,000 annually, concentrate donations over two or three years, alternating years. Give $18,000 in 2026, nothing in 2027-2028, then $18,000 again in 2029. This maximizes deductions above the floor in giving years while taking the standard deduction in non-giving years.

The Top Bracket Limitation: When 37% Becomes 35%

High-income taxpayers in the 37% federal bracket now face an additional constraint: itemized deductions, including charitable contributions, yield a maximum benefit of 35 cents per dollar instead of 37 cents.

The mathematics: A $100,000 charitable donation that previously saved $37,000 in federal taxes now saves $35,000—a $2,000 reduction in tax benefit for every $100,000 donated.

This affects single filers with taxable income above approximately $640,600 and joint filers with taxable income above approximately $768,700 (2026 tax year thresholds).

The calculation involves adding itemized deductions to AGI, then reducing deductions by 2/37ths of the lesser of itemized deductions or income exceeding the 37% bracket threshold. It’s technical, but the practical effect is straightforward: your charitable deduction generates slightly less tax savings than before.

Strategic consideration: This doesn’t eliminate charitable giving incentives—it simply reduces them marginally.

The Non-Itemizer Deduction: Expanding the Base

For the first time since temporary pandemic provisions expired, taxpayers taking the standard deduction can deduct charitable donations—up to $1,000 for single filers and $2,000 for joint filers, starting in 2026.

This creates new planning opportunities for donors whose itemized deductions don’t exceed the expanded standard deduction ($16,100 single/$32,200 joint in 2026).

Practical application: A couple with $150,000 in AGI has $20,000 in potential itemized deductions ($15,000 in SALT, $5,000 in charitable contributions). They’ll take the $32,200 standard deduction instead. But they can still deduct up to $2,000 of their charitable contributions above the standard deduction, creating an additional $2,000 in tax benefit they wouldn’t have received under the previous law.

Important limitation: This deduction excludes donor-advised fund contributions. Only direct gifts to operating charities qualify. If you’ve been routing donations through DAFs for administrative convenience, you’ll need to direct some giving to charities directly to capture this benefit.

The Gift Bunching Strategy: Multi-Year Planning

The combination of the 0.5% AGI floor and the higher standard deduction makes bunching—concentrating multiple years of donations into a single tax year—essential for maximizing tax benefits.

Traditional approach:

2026: Donate $10,000 → Itemize with $28,000 total deductions → Benefit: ~$28,000 deduction
2027: Donate $10,000 → Itemize with $28,000 total deductions → Benefit: ~$28,000 deduction
2028: Donate $10,000 → Itemize with $28,000 total deductions → Benefit: ~$28,000 deduction
Total three-year benefit: $84,000 in deductions

Optimized bunching approach:

2026: Donate $30,000 → Itemize with $48,000 total deductions → Benefit: ~$48,000 deduction
2027: Donate $0 → Standard deduction $32,200 → Benefit: $32,200 deduction
2028: Donate $0 → Standard deduction $32,200 → Benefit: $32,200 deduction
Total three-year benefit: $112,400 in deductions

Same $30,000 donated over three years, $28,400 more in total deductions through strategic timing.

Donating Appreciated Assets: Multiplying Tax Benefits

The OBBBA made permanent the 60% AGI limitation for cash contributions to public charities, but donating appreciated securities or real estate provides superior tax benefits.

Standard cash donation: A $50,000 cash gift generates a $50,000 deduction (subject to AGI limits and new floor).

Appreciated asset donation: $50,000 in stock with $10,000 cost basis generates $50,000 deduction PLUS eliminates $40,000 capital gains tax ($8,400-9,600 federal savings depending on bracket). Total tax benefit: $25,500-28,100 versus $18,500 from cash.

For high-net-worth donors with concentrated stock positions or appreciated real estate, this strategy compounds. Donate $500,000 in stock purchased for $100,000—you receive $500,000 deduction and avoid $400,000 capital gains tax ($76,000-95,200 in federal tax savings depending on capital gains rate).

Timing consideration: Assets held less than one year don’t qualify for fair market value deduction—only cost basis. Ensure appreciated assets have been held at least 12 months before donating.

Estate Planning Integration: The $15 Million Exemption

The OBBBA also increased the estate and gift tax exemption to $15 million per individual ($30 million for couples) for 2026, with inflation adjustments thereafter.

This creates interesting charitable planning opportunities for ultra-high-net-worth families. With higher exemptions, fewer estates face the federal estate tax, potentially reducing the relative value of charitable bequests for tax mitigation.

However, charitable remainder trusts, charitable lead trusts, and strategic lifetime giving still provide income tax benefits, remove appreciation from taxable estates, and create a philanthropic legacy independent of estate tax considerations.

For families with estates approaching but not exceeding the new exemption, redirecting planned estate tax-motivated charitable bequests to lifetime giving may optimize total tax benefits—capturing income tax deductions now while estate tax savings become less relevant.

Strategic Tax Advisory for Charitable Planning

The OBBBA doesn’t eliminate charitable giving incentives—it reshapes them. Donors who adapt their strategy to new limitations will continue receiving substantial tax benefits. Those who maintain previous giving patterns without adjustment will see the deduction value erode significantly.

Effective charitable tax planning now requires:

Multi-year donation bunching strategies aligned with itemization thresholds
Asset selection optimization (appreciated securities vs. cash)
Timing coordination around income fluctuations and AGI management
Integration with broader estate and wealth transfer planning
Ongoing monitoring as IRS issues implementing guidance and inflation adjustments modify thresholds

This level of strategic planning requires specialized tax advisory expertise—not just annual tax preparation, but proactive planning that integrates charitable goals with a comprehensive wealth management strategy.

Wiss Family Office helps high-net-worth individuals and families navigate complex charitable-giving decisions, coordinating deduction optimization, asset donation strategies, estate-planning integration, and multi-year tax projections to maximize philanthropic impact while minimizing tax liability.

Questions about optimizing your charitable giving strategy under the new OBBBA rules? Contact Wiss to discuss comprehensive tax planning tailored to your philanthropic goals.