Now that you have filed – or extended – your 2025 income tax return, it is time to turn your attention to 2026 and what tax law changes could impact your tax situation this year. For those who are charitably inclined, it is financially prudent to leverage the available tax benefits while achieving your philanthropic goals. This article addresses how the tax treatment of charitable contributions – particularly cash contributions – has changed in 2026 due to the One Big Beautiful Bill Act (OBBBA) that was signed into law on July 4, 2025. These new tax laws will impact those who itemize their deductions as well as those who do not itemize their deductions, i.e., take the standard deduction.
What if you Itemize?
The Tax Cuts and Jobs Act of 2017 essentially doubled the standard deduction and limited the state and local income, real estate, and property tax (SALT) deduction to $10,000, resulting in fewer taxpayers itemizing their deductions and thus not receiving a tax benefit for their charitable contributions. However, while OBBBA made the larger standard deduction permanent, it also increased the SALT deduction limit to $40,400 in 2026, for taxpayers whose modified adjusted gross income is under $505,000. This increased limit will increase the number of folks itemizing their deductions and receiving a tax benefit from their deductible charitable contributions. Please note that the SALT deduction limit will increase 1% annually through 2029, then is scheduled to revert to $10,000 in the year 2030.
However, beginning in 2026, the OBBBA introduced a 0.5%-of-adjusted gross income (AGI) hurdle for deductible charitable contributions. Your AGI is essentially your reportable income on your tax return, before deductions. For example, if your AGI is $100,000 and your charitable contributions total $10,000, then your AGI hurdle is $500 (i.e., $100,000 x 0.5%) and your deductible charitable contribution amount is $9,500 (i.e., $10,000 – $500).
While this percentage-of-AGI hurdle is something to keep in mind, the overall deduction limit for charitable contributions remains at 60% of AGI for cash, 50% of AGI for non-cash (i.e. donations to Goodwill, etc.) and 30% of AGI for appreciated securities. Bunching multiple years of charitable contributions in one year, such as contributing to a donor-advised fund (DAF), can make the most of your deduction within these AGI limits. These strategies should yield an increased tax benefit, if you are now able to deduct more of your state and local taxes with the increased SALT deduction limit and itemize your charitable contribution deduction.
What if you do not itemize?
Despite the itemized deduction changes mentioned above, many may still take the standard deduction if its greater than their itemized deductions. For 2026, the standard deduction is $16,100 for single filers, $32,200 for those married filing jointly, not counting additional deductions for folks aged 65+.
Fortunately, beginning in 2026, the OBBBA provides a limited charitable contribution deduction for taxpayers who do not itemize. This deduction applies only to cash charitable contributions and is in addition to the standard deduction. The allowable cash charitable contribution deduction is up to $1,000 for single filers, and up to $2,000 for those who are married filing jointly.
If you expect to take the standard deduction, you still should compile and maintain your receipts to support your cash charitable contribution deduction.
What about Qualified Charitable Distributions (QCDs)?
In addition to the above deductions, another powerful strategy is qualified charitable distributions (QCD). If you are age 70-1/2 or older, you can make charitable contributions directly from your IRA to charity, and these QCDs are excluded from your AGI and taxable income. For 2026, the annual QCD limit is $111,000, and this strategy is particularly powerful for those who have required minimum distributions (RMD) because QCDs satisfy your RMDs. This results in tax-free distributions from your IRA that would otherwise be taxable income to you.
If you make QCDs, please keep track of them and provide them to your tax preparer, because some custodians do not report the amount of QCDs on your Form 1099-R. Informing your tax preparer will ensure that the correct amounts of QCDs and taxable distributions are reported on your tax return.
With the passing of the OBBBA, there are more opportunities to lower your tax bill with deductible charitable contributions. Please note that while these tax laws may apply to most taxpayers, there are additional details, phaseouts, and limitations to consider. Please consult a wealth management advisor or tax advisor to discuss your particular situation.
Bringing Strategy and Simplicity to Your Giving
Qualified Charitable Distributions (and charitable contributions in general) can be a powerful tool—but determining whether they truly benefit your situation requires more than a surface-level understanding of the rules. At Godsey & Gibb Wealth Management, we work closely with clients to evaluate how QCDs fit into their broader financial picture, including income needs, tax exposure, and long-term goals. What may look like a straightforward tax-saving opportunity can have meaningful implications for portfolio growth, required distributions, and legacy planning over time.
Because our wealth advisors collaborate directly with in-house tax professionals, we’re able to assess both the immediate and long-term impact of these strategies with a higher level of precision. This integrated approach allows us to adapt your plan as tax laws evolve—such as changes introduced under OBBBA—in effort to ensure your financial strategy remains aligned with your objectives.
For many investors, charitable giving is about more than tax efficiency—it’s about supporting causes that matter while preserving and growing family wealth. We can help you incorporate philanthropic goals into a comprehensive financial plan, so your giving is intentional, sustainable, and aligned with the bigger picture. If you’re considering integrating charitable strategies into your financial plan, we invite you to contact our team to explore what’s possible for your situation.
