This month, we’re thrilled to feature a guest post from Becca Dammann, Certified Financial Planner, who shares what you need to know about the upcoming tax changes in 2026 – and how they could affect your financial and charitable planning.
You may have heard of the One Big Beautiful Bill Act that was signed into law on July 4th of this year. Big items of note within the OBBBA include: The income tax rates of the 2017 Tax Cut and Job Act were made permanent; the introduction of a new $6,000 senior deduction; and an expansion of the child tax credit. Of course, many of these only apply to people within a certain Adjusted Gross Income so we recommend that you work with your own tax advisor to see what you personally qualify for.
We want to discuss in this forum how the OBBBA may affect your charitable giving. There could be reasons to make charitable contributions in 2025, but there may also be reasons to wait until 2026, depending on your personal situation. Here is a simplistic breakdown comparing the effect on Federal taxes when cash gifts are made in 2025 vs 2026 for two separate situations.
Situation 1: High-income itemizer in 2025 vs 2026
Filing status: Married filing jointly
AGI: $1,000,000
Charitable gift: $50,000 cash to a public charity
2025 rules
- Itemizers can deduct cash gifts to qualified nonprofits up to 60% of AGI.
- Full $50,000 is deductible
- Federal tax savings: $50,000 × 37% = $18,500 saved
2026 rules (OBBBA change)
- **New** 0.5% of AGI floor: only donations above 0.5% of AGI are deductible.
- 0.5% of $1,000,000 = $5,000
- Deductible portion = $50,000 – $5,000 = $45,000
- **New** Limitation on Itemized Deductions of 2/37 for those in the 37% bracket (effectively capping at 35%)
- 2/37 of $45,000 = $2,432
- $45,000 – $2,432 = $42,568
- Federal tax savings: $42,568 x 37% = $15,750 saved
Federal tax savings in 2025 compared to 2026: $18,500 – $15,750 = $2,750 more in 2025
Situation 2: Middle-income standard deduction filer in 2025 vs 2026
Filing status: Married filing jointly
AGI: $150,000
Charitable gift: $2,000 cash to a qualifying public charity
2025 rules
- For those utilizing the standard deduction, the $2,000 gift most likely provides no tax benefit.
2026 rules (OBBBA change)
- **New** Above-the-line deduction for non-itemizers: up to $2,000 for joint filers ($1,000 for single filers)
- Their $2,000 donation is fully deductible.
- Federal tax savings: $2,000 × 22% = $440 saved
Key Takeaway
- In 2026, big donors will lose some of their deduction value because of the new AGI “floor.” Consult with your tax advisor to see if it makes sense to maximize your charitable giving in 2025. If you want to make a large gift but don’t have a nonprofit in mind yet, consider a Donor Advised Fund.
- In 2026, small- and middle-income standard deduction filers gain a new incentive. If you are charitably inclined and are looking to make a cash gift, you may want to consider pushing that holiday gift into January!
I am not a tax advisor (and my colleague, Dan, is not YOUR tax advisor) so this is not meant to be tax advice, rather a way to arm yourself with knowledge following a big change in tax law. We recommend you meet with your tax advisor before year end to see what makes the most sense for you and your family.
Becca Dammann, CFP®
Senior Wealth Advisor
Dan Ritter, CPA
Senior Director, Head of Tax
Sources:
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.fidelitycharitable.org/articles/obbb-tax-reform.html
