New Tax Rules for Charitable Giving in 2026

By Beth Shafer, Growth and Development Coordinator, Veterans Memorial Hospital

Many of us are busy filing our 2025 taxes.  However, it is never too soon to start planning for Tax Year 2026!  The One Big Beautiful Bill Act (OBBA) introduces policies that will affect how charitable contributions are deducted.

In the past, taxpayers who take the standard deduction (about 86% of people) could not deduct their charitable donations on their tax returns.  BHowever, beginning with tax year 2026, if you take the standard deduction and do not itemize, you may deduct up to $1,000 ($2,000 if filing jointly) of your cash contributions to certain qualified organizations. This may be the incentive you need to support a cause that is important to you such as the Veterans Memorial Health Care Foundation.

Example for people who take standard deduction:

• Married couple, filing jointly, take standard deduction
• Combined taxable income is $80,000
• Marginal federal tax rate is 22%
• Donate $1,500 to Veterans Memorial Health Care Foundation

(Before the 2026 rule, charitable donations didn’t reduce taxable income

Starting in 2026, they can deduct up to $2,000 of cash donations, even if take standard

deduction)

• Their $1,500 donation is fully deductible
• Tax savings:  $1,500 x 22% = $330
• By donating $1,500, they reduce their federal tax bill by $330

The biggest OBBA change for itemizers is that individuals can only claim charitable contributions that exceed 0.5% of their Adjusted Gross Income.  For example, if your adjusted gross income is $100,000 and you donated $3,000 to charitable causes. Only donations that exceed $500 (.005 x 100,000) are deductible.  In this example, $2,500 of that donation is deductible. 

This change may encourage itemizers to consider a strategy called “bunching.”  Instead of giving to charity ever year, you combine (or “bunch”) several years of donations into one year so your total deductions are big enough to itemize. Then, the next year, you take the standard deduction. 

The rationale behind this is if you donate small amount every year, you lose 0.5% annually.  However if you bunch multiple years of giving into one year, you only lose 0.5% once.  

Example of bunching for itemizers:

• Annual giving: $8,000
• Other deductions: $20,000
• Standard deduction: $30,000

Giving $8,000 each year: total deductions = $28,000 → below the standard deduction → no tax benefit from charitable gifts.

With bunching: donate $16,000 in the first year and $0 the second year.

• Year 1 deductions: $20,000 + $16,000 = $36,000 → itemize ($6,000 above standard deduction)
• At a 24% tax bracket → $1,440 saved in taxes
• Year 2: take the standard deduction

Another option is a donor-advised-fund which works like a charity savings account.  You contributed cash, stocks or other assets to a sponsoring organization (Schwab Charitable, Edward Jones, etc.) and receive an immediate tax deduction, even if the money hasn’t been distributed to a charity. Money in the DAF grow tax-free, and you can recommend grants to one or more charities over several years.

Example:

• Normally, you give $5,000 per year → too small to itemize
• Contribute $20,000 to a DAF in one year → receive an itemized deduction
• Over the next four years, you can recommend $5,000 per year to your favorite charities

Takeaway

The OBBA makes it possible for even standard-deduction taxpayers to claim some charitable deductions, while itemizers must navigate the new 0.5% AGI floor. Bunching donations or using a donor-advised fund can help maximize tax benefits while continuing to support your favorite causes. Planning ahead now means your giving can be both generous and tax-smart.

For more information, please call Beth Shafer, Growth and Development Coordinator, Veterans Memorial Hospital at 563-568-3411.