By Michael Henley, CFP®, CPWA®, CRPC®, RMA®

When Congress passed the “One Big Beautiful Bill Act” tax legislation in July 2025, the headlines focused on broader tax reforms. However, significant changes to charitable deductions received far less attention despite their substantial impact on families who support philanthropic causes. With 2026 just weeks away, understanding how these provisions affect your charitable strategy has become a priority.

Cash Donations Become Deductible Again for Non-Itemizers

For the past several years, families taking the standard deduction received no tax benefit from making cash donations to charity. This created a disincentive for charitable giving among the vast majority of taxpayers who don’t itemize deductions.

The OBBBA legislation changes this. Beginning in 2026, taxpayers who take the standard deduction can deduct up to $1,000 in cash charitable contributions for single filers, or up to $2,000 for married couples filing jointly. This provision applies regardless of income level and is structured as a permanent change to the tax code.

However, there is an important restriction: donations must go directly to a qualified 501(c)(3) charitable organization. Contributions to donor-advised funds, private foundations, or other charitable vehicles do not qualify for this deduction.

For a family donating $1,000 cash to their local food bank in 2025 while taking the standard deduction, there are no tax savings. That same donation in 2026 results in a $1,000 deduction.

Families should resume tracking charitable receipts starting in 2026. While $1,000 or $2,000 may seem modest compared to the charitable giving patterns of many affluent families, the deduction provides a benefit that has been unavailable in recent years.

New Income-Based Limitation Reduces Charitable Tax Deductions for Itemizers

The second change affects families who itemize deductions and make substantial charitable contributions. This provision is considerably less favorable for maximizing charitable tax deductions.

Under current law in 2025, a donation of $100,000 in appreciated securities to charity generates a charitable deduction of up to $100,000 (subject to AGI limits). Starting in 2026, charitable deductions for itemizers will be reduced by 0.5% of adjusted gross income (AGI) or, as the rule reads, they will only be able to deduct that portion of the aggregate donation that exceeds 0.5% of their adjusted gross income. This non-deductible portion is referred to as the “floor” under this rule.

Consider a married couple with $800,000 in AGI who donate $100,000 of appreciated stock to charity. In 2025, they receive a deduction for the full $100,000. In 2026, however, their deduction drops to $96,000. The $4,000 reduction (the non-deductible “floor”) represents half a percent of their $800,000 AGI. The $96,000 excess above the floor is tax-deductible.

This limitation applies to all charitable donations for itemizers, whether the funds go directly to a charity or to a donor-advised fund.

Year-End Planning Maximizes Charitable Tax Deductions

For families planning significant charitable contributions, 2025 may offer a more favorable tax environment than 2026. Accelerating planned donations before December 31st preserves the full deduction without the AGI-based reduction.

This is particularly relevant for families who regularly fund donor-advised funds. A contribution of $150,000 split between 2025 and 2026 results in a smaller total deduction than making the full contribution in 2025. Once funds are in a donor-advised fund, they can be distributed to charities gradually over time while the donor retains the immediate tax benefit from the year of contribution.

High-income years present an additional planning opportunity. Families who sold a business, exercised substantial stock options, or realized significant capital gains have historically used large charitable contributions to offset those gains. The full deduction available in 2025 makes this strategy more effective this year than it will be in subsequent years.

Those with a high AGI where a portion of their taxable income is taxed at the 37% bracket have an additional tax concern. Under OBBBA in 2026, a portion of all their itemized deductions, including charitable donation deductions and other itemized deductions like state and local taxes and mortgage interest, is disallowed.

The new rule caps the benefit of itemized deductions to 35 cents on the dollar, rather than the previous 37 cents for the top bracket.

The new rules are complicated. If you have significant income and make, or may make, considerable charitable donations this year and/or next year, we strongly recommend you consult with a tax professional soon to determine how these changes affect your own situation and plan accordingly.

Coordination With Your Financial Plan

These charitable giving changes do not exist in isolation. They interact with required minimum distributions, Social Security income, Medicare premiums, and overall tax bracket management.

Should multiple years of charitable contributions be bundled into 2025? Does it make sense to fund a donor-advised fund before year-end? How do these changes affect families who use qualified charitable distributions from their IRAs? The answers depend on individual circumstances, income projections, and philanthropic objectives.

Understanding the New Charitable Tax Deduction Landscape

If you would like to discuss how these charitable giving changes affect your specific situation, we welcome the opportunity to help. Call (484) 785-0050, email contact@brandywineoak.com, or schedule a consultation online to learn how we can help you develop a more tax-efficient charitable giving strategy. To hear from families who trust us with their financial future, visit our client testimonials page.

Frequently Asked Questions About Charitable Tax Deductions in 2026

Can I still get a charitable tax deduction in 2026 if I take the standard deduction?

Yes, but only for cash donations made directly to qualified charities. The new law allows single filers to deduct up to $1,000 and joint filers up to $2,000 annually. Keep in mind this benefit doesn’t apply if you contribute to a donor-advised fund; the money must go straight to organizations with 501(c)(3) status. You’ll want to keep your receipts, as this recordkeeping requirement returns after several years of being unnecessary for most taxpayers.

How much will the new AGI reduction cost me on a large charitable gift?

The impact depends entirely on your income level. A family earning $500,000 who donates $50,000 will lose a $2,500 deduction (0.5% of AGI). A family earning $1 million who donates $200,000 will lose a $5,000 deduction. The higher your income, the larger the dollar amount you forfeit. While the percentage seems small, it compounds over time for families who give consistently. The reduction applies across all your charitable giving for the year, not to each individual donation.

Should I accelerate my planned charitable gifts before the end of 2025?

For large donations where you itemize, moving the gift into 2025 avoids the income-based reduction entirely. If you were planning to give $75,000 in early 2026 anyway, making that gift in December 2025 instead preserves your full deduction. However, smaller donations, or situations where you’ll benefit from the new standard deduction provision, may not require any timing adjustment. The analysis becomes more nuanced when you factor in multi-year giving strategies, donor-advised fund contributions, and your expected income in both years.

About Michael

Michael Henley is the Founder and CEO of Brandywine Oak Private Wealth, a private wealth management and registered independent advisory firm headquartered in Kennett Square, PA. Over the course of his 20-year career, Michael has been dedicated to helping wealthy individuals and families plan and manage all aspects of their finances and investments. With a passion for helping others look behind the curtain and understand the complex world of finance, he develops close relationships with clients as he helps them progress toward their financial goals. Michael loves to provide clarity and alleviate financial anxiety, help prevent families from overpaying in taxes, and give wealthy families permission to enjoy their life savings. He says, “No work is more gratifying than giving families outcomes to what matters most to them.”

Michael holds the CERTIFIED FINANCIAL PLANNER®, Certified Private Wealth Advisor®, Chartered Retirement Planning Counselor℠, and Retirement Management Advisor® designations. Residing in Chadds Ford, PA, with his two children, he enjoys outdoor activities, particularly maintaining trails on his property, hiking with his dogs, and being an actively engaged dad, always taking his kids everywhere. Michael’s latest hobby is tennis and he recently started ice skating to join his daughter Savannah. He can also be found moving logs to the firepit with his son Maverick on the tractor. Michael serves on the board of United Way of Southern Chester County and loves mentoring younger advisors. Great mentors helped him succeed, and he’s convinced that every leader needs to both have mentors and be a mentor. To learn more about Michael, connect with him on LinkedIn.

Brandywine Oak Private Wealth is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.