If charitable giving is part of your financial life, 2026 brings changes you need to know about. The One Big Beautiful Bill Act (OBBBA) has reshaped the rules around charitable deductions in ways that affect how much tax benefit you actually receive from your donations.
For clients who give regularly, the shift is significant. Giving the same way you always have may now produce a smaller tax benefit than you expect. A few strategic adjustments can make a meaningful difference. At HBKS Wealth Advisors, we work with clients to make sure their charitable giving is aligned with their broader financial plan, not just their good intentions.
What Changed, and Why It Matters
The OBBBA introduced several changes to charitable deductions that take effect in tax year 2026. The most consequential for regular givers is a new deduction floor for itemizers.
Under the new rules, if you itemize your deductions, only the portion of your total charitable contributions that exceeds 0.5 percent of your adjusted gross income (AGI) is deductible. For a client with an AGI of $500,000, that means the first $2,500 in donations produces no deduction at all. Contributions beyond that threshold are deductible, but smaller or mid-range gifts may generate less benefit than they once did.
For clients in the highest tax bracket, there is an additional change. Deduction savings are now capped at 35 percent, even if your marginal rate is 37 percent. On a $50,000 donation, that difference adds up.
The 60 percent AGI cap on cash gifts to qualified charities remains in place, and the standard deduction has increased substantially, to $16,100 for single filers and $32,200 for married couples filing jointly. For some clients who previously itemized, it may now make more financial sense to take the standard deduction, depending on their overall picture.
The Case for Bunching
One of the most practical responses to the new floor is a strategy called bunching. Rather than making moderate donations each year, bunching consolidates two or three years of planned giving into a single tax year. This allows you to clear the 0.5 percent floor more decisively and maximize the deductible portion of your contributions.
Here is a simplified example. A client with an AGI of $400,000 plans to give $8,000 per year to causes they support. Under the new rules, the deduction floor is $2,000, so they can deduct $6,000 annually. If instead they give $24,000 in year one and nothing in years two and three, they deduct $22,000 in the first year, and take the standard deduction in the following two. Depending on their tax bracket and overall deduction picture, the three-year total benefit may be higher.
Bunching is not the right approach for every client, and the math varies depending on AGI, filing status, and the nature of the organizations receiving gifts. But for clients who give consistently and care about the tax efficiency of their giving, it is worth modeling.
Pairing Bunching with a Donor-Advised Fund
For clients who want to consolidate a large gift in one year without directing all of it immediately, a donor-advised fund (DAF) can be a useful complement to a bunching strategy.
A DAF allows you to make a sizable contribution in the current tax year, claim the deduction now, and distribute grants to your chosen charities over time. You receive the tax benefit when you fund the DAF, not when the grants go out. This means your giving timeline stays flexible while your tax planning stays intentional.
It is worth noting that the new non-itemizer deduction, which allows those taking the standard deduction to deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash gifts, does not apply to contributions to donor-advised funds. If you are using a DAF, itemizing is required to capture the deduction.
What This Means for Your Plan
The OBBBA changes do not reduce the value of charitable giving. They do, however, require a more deliberate approach to how and when you give.
If you have not reviewed your giving strategy since these rules took effect, now is a good time to do that. The questions worth asking include:
- Does your current giving pattern clear the 0.5 percent floor?
- Would bunching produce a better outcome over a two or three year window?
- Is a donor-advised fund a fit for how you want to give?
- Are you still better served by itemizing, or has the higher standard deduction changed that calculation?
These are not complicated questions, but they do require looking at your full financial picture before answering them.
FAQ
Q: Do these new rules affect everyone who gives to charity? The changes affect taxpayers differently depending on whether they itemize or take the standard deduction. Itemizers face the new 0.5 percent AGI floor, while non-itemizers gained a modest new deduction for cash gifts up to $1,000 or $2,000 for joint filers. High earners in the 37 percent bracket also face a cap on deduction savings.
Q: What is the bunching strategy and is it right for me? Bunching means concentrating multiple years of planned charitable giving into a single tax year to maximize deductions above the new AGI floor. Whether it makes sense depends on your AGI, your typical giving level, your filing status, and your broader tax picture. An advisor can model the numbers for your specific situation.
Q: Can I use a donor-advised fund with a bunching strategy? Yes, and for many clients the two work well together. You can fund a DAF in the bunching year to capture the deduction, then distribute grants to your chosen charities over the following years at your own pace.
Q: Does the 0.5 percent floor apply to all types of charitable gifts? The floor applies to itemized charitable deductions generally. The specific rules can vary depending on the type of organization and the nature of the gift. A qualified tax or financial advisor can help you understand how the rules apply to your giving.
A More Coordinated Approach to Giving
Charitable giving reflects your values. A well-designed giving strategy makes sure it also reflects good planning.
If you would like to review how the new rules affect your current approach, we are glad to help. Schedule a conversation with Larry Fiorella or a member of the HBKS Wealth Advisors team to take a closer look at your giving plan in the context of your overall financial picture.
Important Disclosure:
The information and examples included in this document are for general, educational, and informational purposes only. It does not contain any financial or investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any financial or investment advice. If you would like financial or investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.
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