Beginning in 2026, changes to federal tax law governing charitable contribution deductions will affect many itemizers. While charitable giving remains beneficial under the tax code, two new limitations may influence donor behavior. Nonprofit leaders and development professionals should understand these changes and consider proactive strategies to sustain giving momentum.

0.5% AGI floor on charitable deductions

Starting in 2026, taxpayers who itemize deductions will be able to deduct charitable contributions only to the extent those gifts in total exceed 0.5% of their adjusted gross income (AGI).

For example, a taxpayer with $200,000 of AGI who contributes $10,000 to charity in 2026 will be able to deduct only $9,000 [$10,000 – (.005 x $200,000)]. While the floor is relatively modest, it may cause some donors to rethink their charitable giving strategy.

35% cap on the tax benefit of itemized deductions

A second change affects taxpayers in the top income tax bracket of 37% (individuals with taxable income above $640,600 and married couples filing jointly with taxable income above $768,700). Beginning in 2026, the tax benefit of itemized deductions, including charitable contributions, will generally be capped at 35%.

In practical terms, this means that while a donor in the 37% bracket can still deduct charitable gifts, each dollar deducted will reduce tax liability by 35 cents instead of 37 cents. This seemingly small difference can be meaningful for donors making large contributions, particularly those accustomed to maximizing tax efficiency in their philanthropic planning.

Importantly, this change doesn’t limit the amount a donor may give or deduct; it only limits the rate at which the deduction reduces taxes. Nonetheless, some donors may perceive charitable giving as slightly less advantageous from a tax perspective.

Encouraging giving despite new limitations

Although these changes may reduce the tax benefit of donations for many donors, nonprofits can take steps to help donors navigate the new rules and remain engaged.

First, education is key. Communication about how the new rules work, and reassurance that charitable giving continues to provide meaningful tax benefits, can help donors make informed decisions. Without a clear and detailed understanding, donors may overestimate the negative impact of these changes.

Second, nonprofits can encourage donors who are concerned about the new AGI floor to consider “bunching” contributions that they’d normally make over two or more years into one year. By concentrating multiple years of giving into a single tax year, donors can reduce the negative impact of the 0.5% AGI floor and maximize deductions.

In the previous example, if the donor makes $10,000 in donations in 2026 and another $10,000 in 2027 and AGI remains at $200,000 for both years, each year the donor’s deduction will be reduced by $1,000, for a total deduction over two years of $18,000. But if the donor bunches donations into 2026, the donor’s 2026 $20,000 deduction will be reduced by that same $1,000.

The donor won’t have an itemized charitable deduction for 2027, but the donor’s total deduction for the two-year period will be $19,000. (Without itemizing deductions in 2027, the donor can still make some donations and claim the new charitable deduction for non-itemizers for up to $1,000 cash contributions, or $2,000 for married couples filing jointly.)

Third, emphasizing non-tax motivations for giving is increasingly important. Donors consistently cite mission impact, community benefit and personal values as primary drivers of generosity. Highlighting measurable outcomes, success stories and long-term impact can reinforce giving decisions independent of tax considerations.

Finally, planned giving strategies, such as gifts of appreciated assets, charitable remainder trusts, or qualified charitable distributions from IRAs (for eligible taxpayers) remain powerful tools that may offer donors valuable tax advantages beyond charitable deductions.

Looking ahead

While the 2026 changes introduce new considerations for donors and nonprofits alike, they don’t diminish the essential role charitable organizations play in communities. By understanding the latest rules and adapting fundraising strategies accordingly, nonprofits can continue to build strong donor relationships and advance their missions well into the future.

©2026