What's Happening?
Significant changes to charitable tax deductions are set to take effect in 2026 under President Trump's tax and spending package. These changes will impact both itemizers and non-itemizers differently. For itemizers, a new 0.5% adjusted gross income (AGI)
floor will mean only contributions exceeding this threshold are deductible. Additionally, a 35% cap on deduction value will apply to those in the top tax bracket. Non-itemizers will be able to claim deductions for cash donations up to $1,000 for single filers and $2,000 for couples. These changes are reminiscent of temporary measures during the COVID-19 pandemic that boosted donations.
Why It's Important?
The upcoming changes could significantly affect charitable giving patterns. Itemizers may choose to accelerate donations before the new rules take effect to maximize deductions. Non-itemizers might delay contributions until 2026 to benefit from the new deduction. These adjustments could influence the timing and amount of charitable donations, impacting nonprofit organizations that rely on such contributions. The changes also reflect broader tax policy shifts under President Trump's administration, affecting taxpayers' financial planning strategies.
What's Next?
Taxpayers are advised to consider their giving strategies in light of the upcoming changes. Itemizers might benefit from bunching donations in 2025, while non-itemizers should plan to donate in 2026. Financial advisors are likely to offer guidance on optimizing charitable contributions under the new rules. The IRS will continue to provide updates and resources to help taxpayers navigate these changes.
