New Deduction for Non-Itemizers

Beginning in 2026, taxpayers who claim the standard deduction (and do not itemize) will have access to a new charitable contribution deduction. Individuals can deduct up to $1,000, while married couples filing jointly can deduct up to $2,000. This above-the-line deduction applies only to cash donations made directly to public charities—not to donor-advised funds or private foundations—and is a permanent change.

This provision is expected to encourage more giving among moderate donors who previously received no tax benefit, potentially increasing participation in charitable contributions by non-itemizers.

0.5% AGI Floor for Itemizers

For those who continue to itemize, a 0.5% adjusted gross income (AGI) floor now applies. Contributions below this threshold are not deductible. For instance, an individual with $1 million in AGI would lose the deduction for the first $5,000 in charitable gifts.

Any contributions disallowed under this floor may be carried forward for up to five years, but only if the donor’s contributions exceed the floor in future years.

1% Floor for Corporations

Corporate charitable deductions are now subject to a 1% taxable income floor in addition to the long-standing 10% cap. Contributions below this threshold do not qualify for a deduction. Similar to individual rules, unused amounts may be carried forward for up to five years, but only if the 10% cap is exceeded in later years.

Strategic Considerations for Donors and Nonprofits

These new rules significantly alter charitable giving strategies:

• Gift bunching into higher-income years can help donors exceed the AGI floor and maximize deductions, particularly when using donor-advised funds.
• Donors aged 70½ and older can still make Qualified Charitable Distributions (QCDs) directly from IRAs to reduce AGI and bypass the 0.5% floor.
• Nonprofits should highlight the new deduction available to non-itemizers, encouraging small and mid-level donors to take advantage of the up-to-$2,000 deduction.
• Corporate donors may need to reevaluate the timing and structure of gifts to meet the 1% floor or consider treating certain contributions as business expenses under Section 162.

While the OBBBA expands tax benefits for certain taxpayers—especially non-itemizers—it also introduces new floors and limits that reduce deductions for high-income individuals and corporations. Both donors and nonprofits should revisit their giving strategies and communications to make the most of these changes.