Key takeaways:

• Beginning in 2026, standard deduction filers can claim a $1,000–$2,000 above-the-line deduction for charitable giving

• High-income households will face tighter caps on charitable deductions and a new AGI threshold

• 2025 offers a final window for high earners to maximize giving under current tax rules

Starting in 2026, most Americans will qualify for a new above-the-line deduction for charitable giving, just as new limits kick in for high earners and corporations.

The charitable giving landscape is about to shift — and for 144 million Americans, it could be a good thing.

The One Big Beautiful Bill Act (OBBBA), passed in July, makes the most sweeping changes to charitable tax deductions in over a decade. For tax year 2026, Americans who take the standard deduction will be eligible for an above-the-line charitable deduction for the first time.

This means individuals who don't itemize on their taxes will  be able to deduct up to $1,000 (single) or $2,000 (joint) in charitable contributions from their taxable income. For a household in the 22% tax bracket, a $1,000 donation could translate to a $220 tax break. For tax year 2022, there were roughly 162.2 million returns filed by individuals, and 88.6%, or about 144 million, opted for the standard deduction.¹

Read more: Ways to avoid or minimize capital gains tax

Stricter rules for affluent donors

While smaller donors may gain ground, the law introduces new limits for those at the top of the income scale, starting in 2026:²

• Charitable deductions will only apply to giving above 0.5% of adjusted gross income (AGI)

• The top deduction rate will fall from 37% to 35%³

• Corporate donations must meet a new 1% income threshold to be deductible

That means a donor who gives $100,000 in 2025 could see their tax break shrink by thousands for tax year 2026. Households with $1 million in AGI, for instance, would get a $37,000 deduction in 2025 — but only $33,250 in 2026.⁴

Because these new restrictions don’t take effect until 2026, large donors have a final window in 2025 to maximize deductions under current, more favorable rules. High-earners can opt to maximize their charitable contributions for tax year 2025, particularly through donor-advised funds (DAFs), which enable donors to take deductions now but distribute funds to charities over subsequent years.⁵

Read more: Retirement income strategies: Get the most out of your retirement

Qualified charitable distributions remain valuable

The reform does not affect Qualified Charitable Distributions (QCD) from IRAs. Individuals aged 70½ or older can still directly transfer up to $100,000 from their IRA to qualified charities without increasing their taxable income.⁶ This method continues to help satisfy required minimum distributions (RMDs) without pushing retirees into higher tax brackets or affecting Medicare premiums. And for those at least 73 years old, a QCD also counts toward the IRA owner’s required minimum distribution (RMD) for the year.

Read more: Tax 101: Understanding the basics

Considerations when donating to charity

Philanthropic decisions, much like investment choices, involve assessing opportunity costs. Donors must weigh immediate tax savings against potential asset growth if those funds remained invested. For instance, donating appreciated stock could offer immediate deductions and avoid capital gains tax, compared to selling the stock first, which reduces the after-tax donation amount.⁷

Read more: Charitable giving: Tax-smart strategies for doing good

Impact on charitable trends

The new deduction for smaller donors may broaden the charitable base. Last year, $592.5 billion was donated to U.S. charities, up 6.3% from the previous year, and $392.45 billion was from individuals, according to Giving USA.⁸

This participation could increase as a result of the new charitable donation tax laws. However, some nonprofits worry about possible declines in very large donations due to tighter deduction rules for affluent households and corporations.⁹

For tax year 2025 and beyond

For those who donate to non-profits, key considerations moving forward include:

• Timing: Evaluate if moving contributions into 2025 maximizes tax efficiency.

• Structure: Choose between donating cash, appreciated assets, or QCDs based on tax implications.

• Vehicle: Determine whether DAFs or private foundations offer the best strategy for long-term giving.

• Eligibility: Confirm donations qualify under IRS rules.