The 2018 tax law overhaul brought significant changes to itemizing deductions, primarily due to an increase in the standard deduction and a cap on state and local tax deductions (SALT). This shift made itemizing less attractive for many taxpayers. However, charitable contributions remain deductible for those who choose to itemize their deductions.
Beginning in 2026, OBBBA reshapes the charitable deduction in three ways. First, it creates a permanent above-the-line deduction for non-itemizers: taxpayers who take the standard deduction may also deduct up to $1,000 ($2,000 if married filing jointly) of cash gifts to qualifying charities. Second, it imposes a 0.5%-of-AGI floor on itemized charitable deductions — only the portion of your contributions exceeding 0.5% of AGI is deductible. Third, it caps the value of itemized deductions at 35% for taxpayers in the top (37%) bracket. In short, non-itemizers finally get a modest deduction, while heavy itemizers and top-bracket donors lose a small slice of benefit.
For those passionate about supporting charitable causes, this aspect of the tax code is particularly relevant. Even though the tax benefits of itemizing have diminished for some, the opportunity to deduct charitable donations can still make itemizing a worthwhile strategy for reducing your taxable income, provided your total deductions exceed the standard deduction. This maintains the incentive for charitable giving, especially for those strategically planning their donations to maximize tax advantages.
For more information, refer to IRS Pub. 526, “Charitable Contributions”, which details the tax benefits of charitable contributions, including those of appreciated securities.