Trump's tax bill alters charitable deductions for 2026

Source published 4h 10m agoTerminal published 4h 7m ago

Summary

Starting in 2026, taxpayers may experience changes to their charitable tax deductions due to provisions in President Donald Trump's 2025 tax law, colloquially referred to as the "big beautiful bill." This legislation introduces a charitable deduction floor for itemizers, allowing deductions only for amounts exceeding 0.5% of adjusted gross income, potentially shrinking the tax benefits for some higher earners who donate less. Additionally, a new cap limits the value of the charitable deduction for the highest income taxpayers to 35%. The law also includes a non-itemizer charitable tax break for cash contributions, which can provide up to $1,000 for single filers and up to $2,000 for married couples. Financial advisors suggest proactive strategies, such as donor-advised funds, to help optimize these deductions amidst the complexity of the new rules.

Analysis

Ed Jastrem: Ed Jastrem is a certified financial planner and senior planning specialist at Savant Wealth Management in Westwood, Massachusetts. He commented on how the new charitable deduction changes have made tax and income planning increasingly complex for clients. Josh Norris: Josh Norris is a certified financial planner, founder of LeFleur Financial in Jackson, Mississippi, and a certified public accountant. He noted that the combination of the charitable deduction floor and cap will make multiyear planning more important for clients. 2025 tax law: The 2025 tax law refers to the multitrillion-dollar tax and spending package signed by President Donald Trump in July 2025. It includes modifications to the charitable deduction, such as a new floor for itemizers and a cap on the benefit for top-bracket taxpayers, affecting returns filed in 2027 for the 2026 tax year. Donald Trump: Donald Trump is the President of the United States. He signed the multitrillion-dollar tax and spending package known as the 'big beautiful bill' in July 2025, which introduced significant changes to the charitable deduction rules effective for the 2026 tax year. Tax Legislation: President Donald Trump's 2025 tax law introduced a charitable deduction floor for itemizing taxpayers and a cap on the deduction's value for those in the highest income tax bracket. Charitable Giving: The 2025 tax law also created a non-itemizer charitable tax break for cash contributions to eligible organizations. Planning Strategies: Financial advisors recommend tools such as donor-advised funds and tax lot selection to help taxpayers navigate the updated charitable deduction rules.

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