Charitable giving gets a tax makeover in 2026

Charitable giving has long been an important part of year-end tax planning. The OBBBA introduces a new deduction for non-itemizers while imposing new contribution floors on itemizers and C corporations. Every tax season, someone asks the same question: "Can I still deduct my donations?" Starting with tax years beginning after Dec. 31, 2025, your honest answer just got a lot more interesting.

The One Big Beautiful Bill Act (OBBBA) doesn't kill the charitable deduction. It reshuffles it. Whether your client benefits now depends less on how generous they were and more on how they file, what kind of entity they are and what, exactly, they handed over. If you're not walking clients through these mechanics before year-end, you're leaving deductions, and trust, on the table.

A new tax break for non-itemizers

For years, taking the standard deduction meant giving up any charitable tax break. That's no longer entirely true. Under new §170(p), a taxpayer who claims the standard deduction can separately deduct qualifying cash contributions of up to $1,000 on an individual return, or $2,000 for a married couple filing jointly. The gift has to be cash, made during the year and given to an organization described in §170(b)(1)(A). Contributions to supporting organizations under §509(a)(3) and gifts that establish or maintain a donor-advised fund don't count.

This isn't an itemized deduction. It factors into taxable income under §63(b) and skips the floor described next. For millions of non-itemizing clients, that's a brand-new, if modest, incentive to give.

A 0.5% floor is the fine print for itemizers

Clients who itemize are facing the opposite trend: a new hurdle before their giving even counts. Section 170(b)(1)(I) now requires an itemizer's charitable contributions to exceed 0.5% of their contribution base, generally AGI without regard to an NOL carryback, before any deduction applies. Picture a client with a $100,000 contribution base. The first $500 of otherwise deductible giving simply doesn't produce a benefit.

This floor stacks on top of existing percentage limits, like the familiar 60% AGI cap on cash gifts to public charities. Whether the disallowed amount becomes a carryover or disappears for good depends on a statutory ordering rule and whether the gift was also limited by an AGI percentage cap. Standard carryovers still run five years; qualified conservation contributions still get 15. And don't stop at the charitable floor. High-income itemizers may also run into the §68 limitation on the tax benefit of itemized deductions. The limitation reduces itemized deductions by 2/37 of the lesser of total itemized deductions or the portion of taxable income, computed before the limitation and increased by itemized deductions, that exceeds the start of the 37% tax bracket. For example, assume a client has a $100,000 contribution base and makes $8,000 of otherwise deductible cash gifts to public charities during the year. The 0.5% floor is $500, so only $7,500 of the contribution is potentially deductible; the first $500 produces no charitable deduction. If the client gives $500 or less, none of the contributions produces a current deduction under the floor.

C corporations have their own floor now

If you work with corporate clients, the changes hit differently. Section 170(b)(2)(A) now allows a C corporation to deduct charitable contributions only to the extent they exceed 1% of taxable income computed for charitable-deduction purposes, still capped at the existing 10% ceiling. Practically, this means gifts at or below 1% generate no current deduction, while amounts above the 10% ceiling generally carry forward for five years.

A contribution disallowed by the 1% floor carries forward only from a year in which the corporation's contributions also exceed the 10% ceiling. Not every corporate payment is a §170 contribution, either. A payment tied to a direct business relationship with a reasonable expectation of a commensurate return may belong under §162 and Reg. §1.162-15(a) instead. And under Reg. §1.170A-1(h)(1), a payment only counts as a contribution to the extent it exceeds the value of goods or services received. This is fact-specific work, exactly the kind clients hire tax professionals for.

Cash, property or inventory? The rules don’t match

The floor rules don't apply uniformly. Cash to public charities still runs through the 60% AGI limitation alongside the 0.5% floor for itemizers. Noncash property carries its own 20%, 30% or 50% AGI limits, valuation and appraisal requirements and carryover rules. Inventory may qualify for special treatment under §170(e)(3), including enhanced deductions for qualifying C corporation gifts and rules for apparently wholesome food, which can shift whether the amount is a charitable limitation issue or a cost-of-goods-sold question entirely. These deductions aren’t automatic, so understanding the rules means you can help your clients get the most out of their contributions.

Where this leaves your clients

Charitable giving is still deductible in 2026. It's just no longer a one-size-fits-all answer. Filing posture, entity type, contribution type, applicable percentage limitations and carryovers all now shape the outcome, and a payment that looks charitable on the surface might really be a business expense underneath.

Clients don't need to memorize the code sections. They need a tax professional who already has.