Charitable Giving After 2026: Tax-Smart Strategies High-Income Donors and Retirees Should Know

Beginning in 2026, charitable giving will look very different from a tax perspective—especially for higher-income taxpayers. Changes enacted under the One Big Beautiful Bill Act (OBBBA) introduce new limits on charitable deductions that reduce their overall tax value, even though the desire to give remains unchanged. For individuals and families who give generously, particularly those approaching or already in retirement, understanding these changes—and planning ahead—will be critical to preserving tax efficiency while continuing to support the causes that matter most.

How the One Big Beautiful Bill Act Changes Charitable Deductions

Starting in 2026, two key rules reshape how charitable contributions reduce federal income taxes:

1. A New Income-Based Deduction Floor

Charitable contributions will only be deductible to the extent they exceed 0.5% of adjusted gross income (AGI).

In practical terms, higher income means:

• A larger portion of charitable gifts receives no tax benefit
• More giving is required before deductions even begin

2. A Cap on the Tax Benefit

Even when charitable contributions are deductible, the tax benefit is effectively capped at 35%, regardless of whether a taxpayer is in a higher marginal tax bracket.

Together, these rules reduce the tax savings generated by charitable giving—without reducing the cost of giving itself.

What This Means for Real-World Donors

Consider a taxpayer who donates $60,000 annually to charity.

Under Current Rules (Through 2025)

• No income threshold applies
• The full $60,000 is deductible
• At a 37% marginal tax rate, tax savings are approximately $22,200

Under New Rules (Starting in 2026)

• A portion of the donation produces no tax benefit
• The remaining deduction generates a smaller per-dollar tax savings
• Total federal tax savings can fall by thousands of dollars annually

As income increases, the effective tax benefit per dollar donated continues to decline. Many higher-income taxpayers may see tax savings drop from roughly 37 cents per dollar donated to closer to 30 cents—or less.

Why Planning Matters More Than Ever

The OBBBA does not eliminate charitable deductions—but it does change the economics of giving. Going forward, how and when you give will matter just as much as how much you give. Fortunately, several charitable giving strategies remain highly tax-efficient under IRS rules.

Tax-Efficient Charitable Giving Strategies That Still Work

Qualified Charitable Distributions (QCDs) from IRAs

For taxpayers age 73 and older, the IRS allows up to $100,000 per year to be donated directly from an IRA to a qualified charity through a Qualified Charitable Distribution (QCD).

According to IRS guidance:

• QCDs count toward required minimum distributions (RMDs)
• The donated amount is excluded from taxable income
• The income never appears in adjusted gross income (AGI)

This exclusion can be more powerful than a deduction because it helps:

• Reduce taxable income
• Lower Medicare IRMAA surcharges
• Reduce taxation of Social Security benefits
• Preserve other deductions and credits tied to AGI

For retirees QCDs are often one of the most effective retirement tax planning strategies available.

Donor-Advised Funds (DAFs)

Donor-advised funds allow donors to:

• Claim a charitable deduction in the year the fund is contributed to
• Distribute grants to charities over time

DAFs can be especially effective for “bunching” charitable giving into a single year—such as before the new deduction limits apply—while maintaining flexibility in future years.

Gifts of Appreciated Assets

Donating appreciated securities or other long-term assets allows donors to:

• Avoid capital gains tax on the appreciation
• Receive a charitable deduction for the fair market value (subject to IRS rules)

This strategy remains a cornerstone of tax-efficient charitable giving for high-income taxpayers.

Charitable Trusts

In certain situations, charitable remainder trusts or charitable lead trusts can:

• Provide income streams
• Support estate planning goals
• Improve long-term tax efficiency while benefiting charities

These strategies are complex and should be coordinated with a CPA and estate planning professionals.

Planning Moves to Consider Now Before the New Rules Take Effect

• Accelerate or “bunch” future charitable giving
• Fund donor-advised funds while current rules still apply
• Review multi-year giving plans with tax timing in mind

Starting in 2026

• Align annual charitable giving with income levels
• Prioritize QCDs for retirees subject to RMDs
• Integrate charitable giving into broader retirement and tax planning

Charitable giving is not going away—but its tax treatment is changing in a meaningful way.

For higher-income taxpayers and retirees, thoughtful planning can help preserve tax efficiency while continuing to support charitable causes. Strategies such as qualified charitable distributions, donor-advised funds, and asset-based giving remain powerful tools when used correctly and in coordination with overall tax planning. If you want to understand how these changes affect your charitable giving, retirement income, and long-term tax strategy, working with a CPA who specializes in retirement and charitable tax planning can make all the difference.