One major provision coming out of the passage of the One Big Beautiful Bill Act of 2025 (OBBBA) is changes to the charitable contribution tax deduction. These changes took effect on January 1, 2026, and will most likely result in changes to charitable giving strategies for many individuals including federal employees and retirees. This column discusses the new IRS charitable deduction tax rules.
Non-Itemizer Charitable Contribution Deduction
Starting with the 2026 tax year, those individuals who do not itemize on their federal income tax return (they do not file Schedule A) can deduct up to $1,000 (single filers) or $2,000 (married joint filers) for charitable donations made to qualified charities. This deduction is available only for cash/check charitable donations made during the calendar (tax) year. Any cash/check contributions exceeding the $1,000/$2,000 limit cannot be carried forward to future calendar years.
There are other restrictions associated with the $1/000/$2,000 charitable donation deduction. Unlike charitable donations made by those individuals who itemize on their federal income tax return, charitable gifts made by cash/check to Donor-Advised Funds (DAF) do not qualify. Also, charitable donations of appreciated securities (stocks, bonds, mutual funds) or property (such as clothing or furniture) made to charitable organizations do not qualify for the $1,000/$2,000 charitable deduction.
Individuals should be aware that the non-itemizer $1,000/$2,000 charitable deduction is a “below the line” deduction. This means the deduction reduces an individual’s taxable income and not their adjusted gross income (AGI). Taxable income for tax filers who do not itemize is equal to gross income minus the standard deduction.
The following example illustrates the non-itemized $1,000/$2,000 charitable deduction.
Example 1. William and Emily are a married couple and file a joint return. During 2026, they expect their adjusted gross income to be $170,000 and plan to make the following charitable contributions: (1) $1,200 in cash to their church; (2) $400 in cash to the American Red Cross; and (3) $750 in clothing and furniture donations to the Salvation Army. Assuming they take the standard deduction when they file their 2026 federal income taxes, they can deduct from their taxable income .
Some Optimization Strategies for Individuals and Married Couples Who Do Not Itemize Deductions
1. Selling used property. Consider selling used property at a nondeductible personal loss and donating the cash proceeds to a qualified charity. This is because property donations to a charity are ineligible for the $1,000/$2,000 non-itemizer charitable contribution deduction.
2. SALT deductions. Many high-income individuals may consider itemizing deductions due to the increased state and local tax (SALT) deduction (maximum $40,000) available (another provision passed by Congress as part of the OBBBA) during the years 2026 through 2029 but may be unable to claim the full SALT deduction due to adjusted gross income (AGI) limitations. However, their charitable deduction may be higher if they itemize, especially if they contribute property instead of cash/check donations.
Limits on Charitable Contributions by Itemizers
The OBBBA added a 0.5 percent of adjusted gross income (AGI) on itemized charitable contributions. This means that a married couple filing jointly with $250,000 of AGI can deduct on Schedule A in charitable contributions (cash, check and/or property) only the amount of 0.5 percent of $250,000, or $1,250. The following example illustrates:
Example 2. During 2026, Richard and Meredith, a married couple filing a joint federal return, have an AGI of $175,000. They make the following charitable contributions: (1) $1,500 to their church; and (2) $750 in property donations to Goodwill. If they itemize on their 2026 federal income tax return, they can deduct $2,250 less $875 (0.5 percent of $175,000) equals $1,325.
For the highest-income tax filers (those filers who are in the 37 percent federal marginal tax bracket) the tax benefit of itemized charitable deductions is capped at 35 percent rather than the top marginal top rate of 37 percent. That reduced the value of the charitable donation by
2 percent/37 percent, or 5.4 percent.
Those federal retirees aged 70.5 or older and who are charitable should also consider making qualified charitable distributions (QCDs) in order to both save on their income taxes and to be charitable at the same time. For those retirees who reached their required beginning date (RBD) with respect to traditional IRAs, a QCD can be used in full or in part of the annual traditional IRA RMD. While there is no charitable deduction associated with a QCD, the QCD is not taxable income to the traditional IRA owner and will offset the annual IRA RMD. QCDs are for many high-net-worth individuals the most tax-efficient way to make charitable contributions.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER®, Chartered Life Underwriter, Chartered Financial Consultant, Registered Health Underwriter and Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, located at 833 Bromley Street Suite A, Silver Spring, MD 20902-3019