The One Big Beautiful Bill Act (OBBBA) imposes a floor and a cap on charitable giving for tax years beginning in 2026. For all itemizers, a new 0.5% floor applies, meaning the first 0.5% of AGI contributed generates no tax benefit. Only the excess of contributions over the floor generates tax savings. Additionally, the tax benefit of charitable contributions (and other itemized deductions) is capped at $0.35 per dollar for those in the 37% bracket.
For the estimated 85% of taxpayers taking the standard deduction, there is an above-the-line deduction of $1,000 for single filers and $2,000 for married filing jointly. However, contributions to donor advised funds are ineligible for this deduction.
A Reliable Way of Giving Remains Attractive in 2025 and Beyond
The good news post-OBBBA is that one of the most popular ways of giving—the qualified charitable distribution—remains as attractive as ever.
This year, for those 70½ or older, up to $108,000 can be transferred from an IRA to a qualified charity. For those 73 or older, a QCD counts against any required minimum distributions (RMDs). A QCD, in effect, reduces the amount of your RMD subject to tax.
For those 70½ but not yet at RMD age, the distribution reduces the size of your IRA without generating a tax. By reducing your AGI and provisional income, it:
- lowers the floor for the deductibility of medical expenses.
- preserves the eligibility for lower Medicare premium thresholds.
- lowers rates of inclusion of Social Security benefits.
Increased Giving for 2026
The aggregate amount of QCDs that are not includable in gross income is increased from $108,000 to $111,000. The amount of QCDs made directly to a split-interest entity that are not includable in gross income under section 408(d)(8)(F)(i)(II) pursuant to a onetime election is increased to $55,000 from $54,000.
The Horizons Ahead
While the primary motivation to give revolves around supporting the mission of your favorite charities, the giving should always be done efficiently.
The changes made by the OBBBA reinforce the growing importance of tax-efficient giving strategies as retirees balance RMD requirements, charitable goals and income management.
With inflation adjustments and broader tax law changes that will begin taking effect in 2026, now is an ideal time to revisit how QCDs fit into your charitable giving/retirement strategy for the foreseeable future.
Read also the blog post “IRS Annual Inflation Adjustments and Other Tax Changes Impacting Giving for 2026” for handy charts featuring tax changes.
Chris Woehrle, JD, LLM, is a technical consultant for Sharpe Group and writes Sharpe Group’s Charitable Dollars & Sense blog series. He teaches charitable gift planning and principles of wealth management in the LLM taxation program at the Widger School of Law at Villanova University. You can connect with Chris by email.
