Charitable giving is a fantastic way to help non-profit organizations you care about achieve their goals. In fact, these organizations count on these donations to operate, as individuals represent 67% of all US charitable giving.1 As reward for taxpayer generosity, the Federal government allows individuals to claim charitable donations to qualifying charities as an itemized deduction. Though the passage of the One Big Beautiful Bill Act (OBBBA) expands the prospect for itemized deductions for many taxpayers, there are some new charitable limitations that take effect in 2026 that high earners should know.
As it stands for 2025, the major restriction for itemizing charitable donations is the limitation of itemizing cash donations above 60% of Adjusted Gross Income (AGI) or appreciated assets above 30% of AGI. These limitations are not changed by OBBBA and will continue going forward. OBBBA introduces two new relevant changes starting in 2026 – the AGI floor and the cap of deductions in the top bracket.
Starting in 2026, there is a charitable floor of 0.5% of your AGI. That means a taxpayer cannot deduct the first 0.5% of charitable contributions they make. For example, if a taxpayer has an AGI of $500,000, the first $2,500 of donations are excluded from itemization.2 The idea of a floor is not a new concept to itemized deductions – medical expenses have a floor of 7.5% of AGI before they are itemized.
In addition to the new charitable floor, the OBBBA introduces a reduction of itemization benefit for those in the top ordinary income bracket. Beginning in 2026, those in the 37% bracket that make charitable donations will see a limitation in the ability to deduct those donations. For taxpayers in the 37% bracket, the deduction benefit is reduced by 2/37ths, effectively capping the tax benefit at a 35% deduction rate.3
The new charitable floor and deduction cap for the 37% tax bracket, starting in 2026, should not stop you from giving to charitable organizations. The changes do, however, present an opportunity to consider changes to your gifting strategy. Depending on your situation, there may be an advantage to accelerating donations that were planned for 2026 to the 2025 tax year, when the new charitable limitations do not yet apply. Your Apella Wealth financial planner, along with your tax professional, can help evaluate your charitable giving strategy to maximize the tax savings associated with charitable donations.
Sources:
1. NPTrust.org
2. USCharitableGiftTrust.org
3. Mercer
Disclosures:
Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.
Apella Wealth does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice.
