Changes to Charitable Donation Deductions Are on the Horizon

If you’ll itemize this year and next, consider advancing some charitable donations that you normally would make in 2026 into this year to avoid the impact of the new 0.5%-of-AGI charitable deduction floor that will take effect next year. 

In future years, consider taking steps to reduce your AGI to minimize the impact of the charitable deduction floor. For instance, you can recognize capital losses from securities held in taxable brokerage accounts and make bigger deductible or pretax retirement plan contributions. 

Another option is to bunch your charitable giving into alternating years. For example, instead of donating $10,000 to charity every year, donate $20,000 every other year. Because the charitable deduction reduction is based on AGI, not the amount of the deduction, you can increase your tax benefit with this strategy (assuming your AGI is steady from year to year). 

In the previous example, if you make $10,000 in donations in 2026 and another $10,000 in 2027 and your AGI remains at $400,000 for both years, each year your deduction will be reduced by $2,000, for a total deduction over two years of $16,000. But if you bunch your donations into 2027, your 2027 $20,000 deduction will be reduced by that same $2,000. You won’t have an itemized charitable deduction for 2026, but your total deduction for the two-year period will be $18,000. 

It’s important to review your overall tax picture before implementing a bunching strategy. For example, if not being able to claim an itemized charitable deduction on your 2026 income tax return would push you into a higher income tax bracket, then bunching may not be beneficial.