Charitable contributions see change in deduction rules

If you donate to tax-exempt charities or nonprofits, be aware. Significant changes are coming that will affect how much of those contributions you can deduct from your taxes. These changes, part of President Donald Trump’s recently passed federal tax-and-spending cuts package, will impact both those who take the standard deduction and those who itemize their deductions.

Cash gifts deductions 

During the first two years of the COVID-19 pandemic, taxpayers who claimed the standard deduction could still write off an additional $300 in charitable cash donations. That temporary benefit has since expired. However, starting in 2026, a new rule allows filers to deduct up to $1,000 in direct cash gifts to qualified charities. “This applies only to direct cash gifts to qualifying 501(c)(3) charities — not donor-advised funds or private foundations,” explained Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals.

New limit placed on itemizers 

Beginning in 2026, itemizers will face a new hurdle as they’ll only be able to deduct charitable cash contributions that exceed 0.5% of their adjusted gross income. If your AGI is $100,000, the first $500 (0.5% of your AGI) of your charitable cash donations won’t be deductible. So if you donate $2,000 in cash, only $1,500 of it can be deducted.

Value of high-income filers’ deductions will be capped

High-income earners in the top tax bracket of 37% will see a cap on the value of their charitable deductions as well. Normally, if you itemize and deduct $10,000 in charitable contributions, you’d reduce your tax liability by your top tax rate multiplied by your deduction — $3,700 in this case. However under the new rule, your deduction will be treated as if you’re in the 35% bracket, reducing your tax bill by only $3,500, according to O’Saben

Tax break for non-cash gifts 

Non-cash donations, like clothes, food or household items, will also be subject to the 0.5%-of-AGI floor if you itemize. That means the first portion of your non-cash gifts, equal to 0.5% of your AGI, won’t be deductible. And if you take the standard deduction? You won’t be able to deduct any non-cash gifts at all because the new $1,000 deduction limit applies only to cash donations.

The post Charitable contributions see change in deduction rules appeared first on Knewz.