New federal tax rules taking effect in 2026 will change how charitable deductions are calculated for both itemizers and non-itemizers. Donors and their professional advisors may need to look more carefully at the timing, structure, and type of charitable gifts, particularly when significant income, appreciated assets, business sales, or other liquidity events are involved.
A New Deduction for Non-Itemizers
Beginning in 2026, taxpayers who claim the standard deduction may also deduct qualifying cash contributions of up to $1,000 for individual filers or $2,000 for married couples filing jointly.
This may provide a modest tax benefit to clients who give regularly but do not have enough deductions to itemize. However, the deduction applies to qualifying cash gifts made to public charities, and specifically excludes contributions to donor-advised funds.
That distinction is important. A direct charitable gift may qualify for the new non-itemizer deduction, while a contribution to a donor-advised fund may still be more appropriate for a client seeking to donate appreciated assets, consolidate recordkeeping, bunch several years of giving, or recommend grants over time.
Understanding the New 0.5% AGI Floor
Clients who itemize will face a new limitation. Beginning in 2026, the deductible portion of their charitable contributions will generally be reduced by 0.5% of adjusted gross income.
This does not mean clients must give more than 0.5% of AGI before any part of the gift is deductible. Instead, the amount equal to 0.5% of AGI is subtracted from their total charitable contributions.
For example, consider a client with an AGI of $500,000:
- The 0.5% floor is $2,500.
- If the client contributes $20,000, the potentially deductible amount is generally reduced to $17,500, before considering other applicable limitations.
- If the client contributes only $2,500, the gift generally would not produce an itemized charitable deduction because the contribution would not exceed the 0.5% AGI floor, although the disallowed amount may be carried forward under the applicable rules.
The floor applies to total charitable contributions, including cash and noncash gifts, rather than separately to each individual donation. The IRS’s 2026 estimated-tax worksheet calculates the limitation by totaling contributions and then subtracting 0.5% of AGI.
Bunching May Require a Fresh Look
The new floor may make annual charitable gifts somewhat less tax-efficient for certain itemizing clients. As a result, bunching several years of anticipated giving into one tax year may become more valuable.
A client could make a larger contribution to a donor-advised fund in a high-income year, potentially using appreciated assets, and then recommend grants to nonprofit organizations over several years. This may help the client exceed the new AGI floor while maintaining a consistent charitable impact in the community.
The right strategy will depend on the client’s income, itemized deductions, assets, anticipated tax bracket, and charitable priorities. Direct gifts, donor-advised funds, qualified charitable distributions, charitable remainder trusts, and other planning tools should not be viewed interchangeably.
Advisors Should Start the Conversation Early
The practical takeaway is not simply that some charitable deductions may be limited. It is that the timing, structure, and type of gift will matter more.
CPAs may identify years in which income is unusually high. Wealth advisors may identify concentrated or highly appreciated assets. Attorneys may be involved in business, estate, or succession planning. A charitable-planning partner can help connect those financial circumstances with the client’s philanthropic goals and the needs of the community.
By working together before a transaction becomes final, or before year-end deadlines begin to narrow the available options, advisors can help clients make informed decisions that support both their financial plans and the causes they value.
Pinellas Community Foundation can work alongside donors and their professional advisors to explain charitable giving options, accept appropriate charitable assets, and help connect a donor’s financial planning with the causes and community needs they care about.
This article is provided for general educational purposes and is not tax, legal, or financial advice. Tax rules and individual circumstances vary. Donors should consult their qualified tax, legal, and financial advisors before making charitable-planning decisions.
Duggan Cooley is Chief Executive Officer of Pinellas Community Foundation and brings more than two decades of nonprofit leadership and fundraising experience to the role. Since joining PCF in 2016, he has expanded its grantmaking, increased its regional visibility, and helped grow the Foundation’s assets to more than $130 million. A longtime Pinellas County resident, Duggan works with donors, advisors, nonprofit organizations, and community leaders to address the region’s most pressing needs.
Connect with Duggan Cooley, CEO https://www.linkedin.com/in/duggancooley/
