Charity And Taxes

The 2017 TCJA nearly doubled the standard deduction and capped SALT, which pushed most households out of itemizing and made the charitable deduction irrelevant to them. 2026 changes the picture again, in four ways that pull in different directions.

A deduction for non-itemizers, permanently

Take the standard deduction and you may also deduct up to $1,000 ($2,000 joint) of cash gifts under IRC §170(p), “Charitable, etc., contributions and gifts”. Read the fine print on the recipient: the gift must go directly to a public charity. Cash routed to a DAF, a private non-operating foundation, or a supporting organization does not qualify — so the vehicle this chapter otherwise recommends is precisely the one that forfeits this deduction.

A 0.5%-of-AGI floor on itemized giving

Only contributions exceeding 0.5% of AGI are deductible ( IRC §170(b)(1)(I)). On $800,000 of AGI the first $4,000 of gifts produces nothing.

The 60% cash ceiling made permanent

It had been scheduled to revert to 50% after 2025 ( IRC §170(b)(1)(G)).

A 35% cap on the value of itemized deductions

For taxpayers in the 37% bracket, itemized deductions are reduced by 2/37 of the income sitting above the 37% bracket threshold ( IRC §68, “Overall limitation on itemized deductions”), so their benefit tops out at 35 cents on the dollar, not 37. A $100,000 gift that used to save $37,000 now saves $35,000.

The floor is the one that changes behavior. It is small in percentage terms and easy to dismiss, and it systematically erodes the tax value of routine annual giving. Because the floor is applied per year, a donor with $800,000 of AGI who gives $5,000 annually deducts $1,000 a year — losing 80% of the benefit — while the same donor bunching five years of gifts into one $25,000 contribution loses the $4,000 floor exactly once and deducts $21,000. Five years of the first pattern deducts $5,000; the second deducts $21,000 for identical generosity.

That arithmetic converts bunching from a mild optimization into the default strategy for anyone who gives consistently, and it is why the donor-advised fund (section “Use Donor Advised Funds (DAF)”) is now close to mandatory infrastructure for a regular giver: it lets you take the deduction in one concentrated year while the charities still receive a steady stream. section “Bunch Your Giving” works the timing through.

For the governing rules, refer to IRS Pub. 526, “Charitable Contributions”.