2026 Tax Update

How will the 2026 tax law changes affect charitable giving — and what nonprofits should know when speaking with donors?

1. New Deduction for Most Donors — Even If They Don’t Itemize

For the first time in several years, donors who do not itemize on their federal tax return can still receive a deduction for making cash gifts to qualified public charities. This change allows nonprofits to highlight a tax benefit to a much broader group of supporters.

  • Individual donors may deduct up to $1,000 of cash donations.
  • Married couples filing jointly may deduct up to $2,000.
  • This is an “above the line” deduction, meaning it reduces taxable income even if the donor takes the standard deduction.
  • To qualify, the donation must be a direct cash gift to a qualified public charity — gifts to donor advised funds (DAFs) or private foundations do not count toward this benefit.

Example: If a donor makes a $1,500 cash gift to your organization, and is a single tax filer who does not itemize, they can deduct up to $1,000 of that gift on their 2026 return.

2. For Donors Who Do Itemize — New Rules Apply

Donors who itemize deductions will still be able to deduct charitable gifts, but the way those deductions are calculated has changed. Nonprofits may wish to help these donors understand how the rules affect their giving:

A. A 0.5% “floor” on deductions
Only the portion of a donor’s total 2026 cash and other deductible gifts that exceeds 0.5% of their adjusted gross income (AGI) will be deductible.
For instance, if a donor’s AGI is $200,000 and 0.5% is $1,000, then only the amount of charitable giving over $1,000 will be deductible.

B. A cap on the benefit for high-income donors
For itemizing donors, the value of the charitable deduction is effectively limited to 35% of the dollar amount donated, even if their marginal tax rate is higher. This replaces the previous situation in which donors in the top bracket could reduce taxable income at a 37% rate.

3. What This Means for Nonprofits in Practical Terms

Nearly all donors can now receive some federal tax benefit for supporting nonprofit organizations — including those who do not itemize.
Donors who traditionally itemize should be aware that:

  • Smaller gifts relative to income may generate a smaller deduction under the new 0.5% floor.
  • The tax value per dollar of a gift may be slightly lower for high-income donors due to the 35% cap.

 

Donor Advised Funds (DAFs) and similar vehicles do not qualify for the new above-the-line deduction, though they may still play a role in certain philanthropic planning strategies.