Giving to Charity? New Tax Rules Apply

If charitable giving is part of your annual plan, several new tax rules from the One Big Beautiful Bill Act (OBBBA) may impact how much you can deduct on your return starting in 2026.

Here’s a breakdown of the key updates:

A Win for Non-Itemizers

Great news if you don’t itemize your deductions! A permanent above-the-line deduction for charitable contributions has been reinstated and slightly increased.

You can now deduct charitable contributions up to:

• $1,000 if filing as a single taxpayer

• $2,000 if filing jointly

This means even if you take the standard deduction, you can still get a tax benefit for supporting charitable causes.

Effective Date: For tax years beginning after December 31, 2025

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New 0.5% Threshold for Charitable Deductions

If you itemize, you can only deduct charitable contributions that exceed 0.5% of your adjusted gross income (AGI).

What this means:

• The first 0.5% of your AGI donated to charity won’t be deductible on Schedule A.

• You’ll only receive a tax benefit for donations that go above that threshold.

• All other existing limits on charitable contributions (like the 60% AGI limit for cash gifts to public charities) still apply.

Effective Date: Applies to tax years beginning after December 31, 2025.

Unsure about how tax deductions work? Check out this article for a breakdown of Tax Credits vs. Tax Deductions.

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A Quick Clarification

The 0.5% AGI threshold does not apply to the above-the-line charitable deduction of $1,000 ($2,000 filing jointly). It only applies to the expanded itemized charitable contribution deduction. So small donors who do not itemize (that's most of us) are the big winners here!

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Giving to Charity: Final Thoughts

These changes create both opportunities and limitations depending on your income and giving patterns. Whether you're a high-level donor or someone who gives a little each year, it’s worth revisiting your charitable strategy before 2026.