Charitable giving has long served two purposes: it supports the causes we care about and can help manage taxes along the way. The One Big Beautiful Bill Act (OBBBA), passed in 2025, keeps the charitable spirit alive but changes how the associated tax benefits work. While generosity still takes center stage, the new rules mean donors may have to plan more carefully to make the most of each dollar.
What Changed
Beginning in 2026, the OBBBA introduces two key limits that affect how much you can deduct for charitable giving. The first is a 0.5% adjusted gross income (AGI) floor. This means you can only deduct the portion of your charitable gifts that exceeds 0.5% of your AGI. For instance, if your AGI is $400,000, the first $2,000 of giving doesn’t count toward a deduction ($400,000 x 0.5%) Only the amount above that threshold does.
The second change affects high earners. If you are in the top tax bracket (37%), there is now a 35% cap on the value of your itemized deductions, which includes charitable gifts. So even if you qualify for a deduction, it’s effectively worth less at that income level. This cap limits the tax value of itemized deductions for those in the 37% bracket, not the size of the gift itself.
Under OBBBA, the charitable deduction limits still apply. Cash gifts remain deductible up to 60% of AGI, and gifts of appreciated securities or property are limited to 30% of AGI, with any excess carried forward for five years.
These changes don’t eliminate the benefit of giving, but they make it more selective. Smaller annual donations may no longer produce a direct tax benefit, and large gifts may yield less savings for those in higher brackets.
Note that for tax years starting in 2026, non-itemizers may also claim a below-the-line charitable deduction of $1,000 (single) or $2,000 (married filing jointly) for eligible cash gifts.
Impact of the Changes
These adjustments represent more than a tweak to the tax tables. They shift how much planning goes into charitable giving. For someone who gives $500 here and $1,000 there throughout the year, the new floor might mean those gifts no longer push them past the threshold for a deduction. This doesn’t make giving less valuable, it just changes when and how you might choose to give if you want to be tax-efficient.
For example, if a retiree couple has a $150,000 AGI, their 0.5% floor is $750. If they give $1,000 in total donations during the year, only $250 would count toward a deduction. In other words, most of their giving wouldn’t reduce their taxes at all.
This new structure also signals a shift in how Congress wants to balance simplicity, fairness, and revenue. A 0.5% floor may not seem like much, but it erodes the value of moderate annual gifts, especially for retirees who no longer have large itemized deductions such as mortgage interest. It’s also a reminder that the tax code continues to favor those who plan ahead. Just as medical expense deductions once had a modest threshold that crept higher over time, this charitable floor could do the same. If that happens, the days when every dollar of giving produced an immediate tax benefit may be behind us. The bottom line is that for those who itemize, the timing and structure of charitable giving have become more important than ever.
Planning Strategies in the New Environment
The following planning strategies illustrate how charitable giving can be coordinated with tax planning to maximize tax-efficiency. Because every tax situation is unique, you should confirm any strategy with a qualified tax or financial professional before making changes to your giving plan.
Bunching Deductions
If you typically donate smaller amounts each year, consider “bunching” several years’ worth of giving into one single year. So, instead of making smaller annual gifts, you might consolidate several years’ worth of giving into one large donation. This can push your itemized deductions above both the 0.5% floor and the standard deduction, allowing you to capture a full tax deduction in that year.
For example, instead of giving $3,000 each year, a donor could give $9,000 in one year and then take a break for the next two years. That larger contribution could help them exceed both the 0.5% floor and the standard deduction, allowing the full $9,000 to provide a tax benefit.
Donor-Advised Funds (DAF)
A donor-advised fund (DAF) allows you to make one large, deductible gift in a single year and then distribute money to charities over time. By contributing to a DAF in a high-income year, you can claim the tax deduction immediately and then distribute funds to your chosen charities over time. For many donors, this is the simplest way to maintain consistent charitable support while managing tax efficiency.
For example, a retiree with a higher-income year due to a Roth conversion might contribute $50,000 to a DAF. They can claim the full deduction that year but give smaller amounts from the fund in future years. This approach locks in the tax benefit up front while spreading the generosity out over several years.
Donating Appreciated Securities
Donating appreciated assets remains another powerful option. Giving stocks or mutual fund shares that have increased in value allows you to avoid capital gains taxes and still claim a deduction for the full fair market value of the asset, subject to the 30% AGI limit.
For example, let’s say you own a stock you bought for $5,000 that’s now worth $15,000. Donating the stock directly lets you deduct the full $15,000 (subject to the 30% AGI limit) and avoid paying capital gains taxes on the $10,000 increase. The charity receives the full value, and you save taxes on two fronts.
Qualified Charitable Distributions (QCDs)
For retirees who no longer itemize deductions, QCDs often represent the most straightforward way to achieve a tax-efficient charitable strategy while fulfilling RMD obligations. A QCD allows individuals aged 70½ or older to make direct transfers from their traditional IRA to a qualified charity, up to $108,000 in 2025 ($115,000 in 2026). For married couples filing jointly, each spouse can contribute from their respective IRAs up to the applicable limit. The main advantage is that QCDs satisfy required minimum distributions (RMDs) while keeping those amounts out of your taxable income. Because the money goes directly to charity, it is never counted as income on your return, which can help reduce AGI and avoid triggering higher Medicare premiums or Social Security taxation.
For example, suppose you are 75, with an RMD of $40,000 and a desire to give $10,000 to your favorite charity. By making that $10,000 gift as a QCD, you meet part of your RMD without adding to your taxable income. The result has the same charitable impact with a smaller tax bill.
It is important to note that QCDs cannot be used to fund donor-advised funds (DAFs), private foundations, or charitable gift annuities, and the transfer must go directly from the IRA custodian to the qualified charity. QCDs are generally limited to traditional IRAs, though inherited IRAs can also qualify. Roth IRAs technically qualify, but since Roth distributions are already tax-free, the benefits are minimal.
There is a lot to think through when it comes to charitable giving in retirement, especially now that the rules have changed. If you want to explore how strategies like QCDs, donor-advised funds, and bunching donations can fit into your overall plan, our Understanding Charitable Giving Strategies and Your Retirement Plan Workshop is a great place to dive deeper. It is part of the Retirement Researcher Academy and is designed to help you give with both purpose and confidence, while making sure your approach fits within your broader retirement goals.
Coordinate Tax Provisions
Your charitable giving doesn’t exist in a vacuum. It’s worth looking at how charitable deductions interact with other income-based limits to prevent tax surprises. The new age-based deduction, the increased SALT deduction cap, and the qualified business income (QBI) phaseout all affect how your AGI flows through your return. In some cases, these interactions can push your effective marginal rate higher, which changes the value of each deduction. Running a tax projection or working with a planner can help you see these effects before year-end.
Giving for More Than the Tax Break
It’s easy to focus on the numbers, but the motivation behind charitable giving usually goes deeper. Tax savings may influence timing or structure, yet the real purpose of giving is personal. For many retirees, donations are a way to express gratitude, leave a legacy, or stay connected to community causes that matter.
Even so, tax awareness helps make that generosity go further. When you give in a way that reduces taxes efficiently, more of your resources stay devoted to the organizations you care about rather than being lost to unnecessary taxes.
Want to learn more? Listen to Episode 202 of the Retire With Style Podcast.
