You Didn't Change How You Give. In 2026, the Tax Code Quietly Made Part of It Nondeductible.
For as long as you've itemized, the first dollar you gave to charity was deductible. That ended on January 1. Under the One Big Beautiful Bill Act, a new floor now sits under every itemized charitable deduction — and a separate change quietly lowers what that deduction is worth for the highest earners. Neither is dramatic on its own. In a large income year, together they can reshape the math on giving you thought you had already figured out.
Here's exactly how each one works, who it hits, and the two moves that put you back in control.
The floor: the first 0.5% of your income no longer counts
Beginning with the 2026 tax year, charitable contributions are deductible only to the extent they exceed 0.5% of your adjusted gross income (AGI). The first half-percent is simply disallowed.
The percentage sounds small. In a large income year, it isn't. Take a couple with $400,000 in AGI who gives $20,000. The first $2,000 — 0.5% of their income — is no longer deductible. Only $18,000 is. Raise the income and the disallowed slice rises with it: at $1,000,000 of AGI, the floor swallows the first $5,000 of giving, every year.
And the floor lands hardest in exactly the wrong year. For someone selling a business, exercising options, taking a large Roth conversion, or realizing a concentrated capital gain, AGI spikes — and that's often the same year charitable giving is largest.
The cap: for top-bracket donors, a deduction is worth less than it used to be
The second change is narrower but sharper. For taxpayers in the 37% bracket, the tax benefit of itemized deductions — charitable gifts included — is now capped at 35%.
In plain terms: a dollar of deduction that used to save 37 cents now saves 35. This cap applies once taxable income crosses roughly $750,000 for joint filers, $625,000 for single or head-of-household, and $375,000 for married filing separately. Above those lines, every itemized deduction you take — not only charitable — is worth a little less than the headline rate suggests.
Who this actually hits
Neither change touches the roughly 86% of taxpayers who take the standard deduction. This is a high-income, high-giving problem — which makes it precisely a problem for the households we work with:
- Donors who itemize and give meaningfully every year
- Anyone with a spike year — a business sale, a large Roth conversion, concentrated stock, or a sizable capital gain
- Top-bracket households, who absorb both the floor and the 35% cap at the same time
If you give a few hundred dollars a year, this is noise. If giving is a real line in your financial life, it is now a planning question.
Move one — stop giving the same amount every year. Bunch it.
The floor is an annual toll. You pay it every single year you give. So the fix is to stop paying it every year.
Instead of giving $20,000 annually, a donor can consolidate several years of gifts into one — say $60,000 in a single year — clear the 0.5% floor once, and itemize in that year while taking the standard deduction in the off years. A donor-advised fund makes this practical: you take the full deduction in the funding year, then recommend grants to your charities on the normal schedule, so the causes you support never feel the gap.
Bunching doesn't only beat the floor. It's often the difference between itemizing and not itemizing at all.
Move two — if you're over 70½, give straight from your IRA and skip the floor entirely
This is the move Retail Wall Street rarely raises, because it doesn't sell a product.
If you're 70½ or older, a Qualified Charitable Distribution (QCD) lets you send up to $111,000 in 2026 directly from your IRA to charity. It isn't a deduction at all — so the 0.5% floor and the 35% cap simply do not apply to it. The money never enters your AGI in the first place.
And because it never enters your AGI, a QCD quietly does far more than fund a gift:
- It sidesteps the new floor and the 35% cap completely
- It can satisfy part or all of your Required Minimum Distribution
- It lowers the AGI that drives your Medicare (IRMAA) surcharge, your SALT phase-out, and the 3.8% net investment income tax
- Done before age 73, it shrinks the IRA balance your future RMDs are calculated on — lowering the tax on distributions you haven't even taken yet
For a retiree who is charitably inclined and holds a large IRA, the QCD is very often the most tax-efficient dollar you can give — and in 2026 it is the only major giving path the new rules leave completely untouched.
The point isn't the tactic. It's the coordination.
Any competent tax preparer can tell you the floor exists — in April, after the year is closed and nothing can be changed. The value was never in knowing the rule. It's in seeing, before the year ends, how your charitable giving, your RMD, your Roth conversion strategy, your IRMAA bracket, and your SALT phase-out all move together — and sequencing them on purpose.
That coordination is the difference between a firm that sells you a product and a firm that manages the whole picture. It is the entire reason a real planning relationship exists.
If your giving is meaningful and you're no longer sure it's working the way you think it is, that's worth twenty minutes.
Take the next step
Schedule a 20-Minute Due-Diligence Q&A Call with a CRA advisor, and we'll look at your 2026 giving in the context of your entire plan — not in isolation, and not in April when it's too late to act.