2026 Charitable Deduction Changes: What Nonprofits Should Tell Donors Before Year-End
2026 is the first tax year under the new charitable deduction rules, which means this December is the first year-end appeal where what you tell donors has actually changed.
The short version: more of your donors can now deduct a gift than at any point since 2021, and some of your most reliable ones just got a reason to give less. Those are different people, and sending them the same letter wastes both.
What Changed, in One Table
Four changes matter, and all four took effect for tax years beginning after December 31, 2025.
One early estimate, from the Indiana University Lilly Family School of Philanthropy with CCS Fundraising, puts the combined effect at a net decline of around $5.69 billion in total giving alongside roughly 8 million additional donor households. Fewer dollars, more donors. That shape is the whole strategic story, and it points your 2027 planning toward volume and retention rather than toward the top of the pyramid.
Not sure how the new rules change your year-end appeal?
The New Deduction for Donors Who Do Not Itemize
This is the first good news for mass-market fundraising in years, and it is permanent rather than a temporary pandemic-era measure like the one that expired after 2021.
Under IRC 170(p), a donor who takes the standard deduction can deduct up to $1,000, or $2,000 filing jointly. IRS Publication 6196 lists it as new for 2026 returns filed in 2027.
The limits matter when you write about it:
And one point of precision that most write-ups get wrong. You will see this called an above-the-line deduction that reduces AGI. It does not. Section 170(p) runs through IRC 63(b)(4), which means it is subtracted from AGI in arriving at taxable income rather than in arriving at AGI. The accurate description is that it is claimed in addition to the standard deduction and has no effect on the donor's AGI.
That is not pedantry. A donor who believes the gift lowers their AGI may expect it to help with something else that keys off AGI, and it will not. If your appeal says "reduces your AGI", a donor's accountant will correct it and your letter becomes the thing that was wrong.
The 0.5% Floor, and the Carryforward Trap
For donors who do itemize, only the portion of total giving above 0.5% of the contribution base is deductible. The contribution base is AGI computed without any net operating loss carryback, and the floor applies to every type of contribution, not just cash.
In practice:
Now the part that is widely misreported. It is commonly said that the below-floor amount carries forward for five years. Usually it does not.
IRC 170(d)(1)(C) is headed, in the statute's own words, "Contributions disallowed by 0.5-percent floor carried forward only from years in which limitation is exceeded." The floor-disallowed slice carries forward only in a year where the donor also exceeded the applicable AGI percentage ceiling. For an ordinary donor sitting comfortably under the 60% ceiling, which is nearly all of them, the amount below the floor is simply lost.
The behavioral consequence is the useful part for you: this is a strong argument for bunching. A donor who gives $1,200 a year at $300,000 AGI deducts nothing two years running. The same donor giving $2,400 every other year clears the floor and deducts $900 of it. Expect more of this, and expect it to make your year-over-year revenue lumpier even when the multi-year total holds. Multi-year pledges and a credible case for giving in a particular year are worth more than they were.
One genuinely unsettled point, and it should stay unsettled in anything you publish: whether charitable carryovers generated before 2026 are subject to the floor when used in 2026. One major firm says they are not; another calls it not entirely clear. If a donor asks, the answer is that it is unresolved and their own advisor should look at it.
The 35% Cap, Briefly
Section 68 was rewritten rather than allowed to lapse. Itemized deductions are reduced by 2/37 of the lesser of total itemized deductions or the amount by which income exceeds the start of the 37% bracket. Because 2/37 of 37% is two percentage points, a top-bracket donor now gets at most 35 cents of benefit per dollar given.
Two details worth knowing. It applies after every other limitation, so the 0.5% floor and the AGI ceilings come first and section 68 trims what survives. And the amount it limits is not carried forward.
Practically this is a modest headwind for the donors best able to absorb it, and it does not change the arithmetic on gifts of appreciated securities, where the capital gains advantage is untouched. If your organization cannot currently receive stock, 2026 is the year to fix that.
Corporate Donors: The Change Most Likely to Cost You
A corporation can now deduct contributions only to the extent they exceed 1% of taxable income, with the existing 10% ceiling unchanged above it. A profitable company whose giving sits below 1% of taxable income gets no deduction at all. And the below-floor amount carries forward only if contributions also exceeded the 10% ceiling, which for a company stuck under the floor is almost never.
That is an all-or-nothing cliff rather than a gradual reduction, and it pushes corporate givers in three directions: give more to clear the floor, bunch into alternate years, or move the money to sponsorship, which is deductible as an ordinary business expense without any of this.
For a nonprofit with meaningful corporate support, that third option is the real risk, and it is structural rather than cyclical. The practical response is to make sure your sponsorship package is genuinely worth buying as marketing, because some of your corporate donors are about to start evaluating it that way. Treat corporate revenue as the line most likely to move in your 2027 budget and model it in the downside case.
The One Thing the New Limits Do Not Touch
Qualified charitable distributions. A donor aged 70 1/2 or older can transfer funds directly from an IRA to a qualifying charity, and the 2026 limit is $111,000 per taxpayer, up from $108,000, indexed for inflation under SECURE 2.0.
Be careful with that number. A figure of $115,000 is circulating for 2026 and it is not supported. The Congressional Research Service puts it at $111,000.
Why this is your strongest 2026 talking point for older donors: a QCD is an exclusion from income, not a deduction. So the 0.5% floor does not apply to it, the 35% cap does not apply to it, and whether the donor itemizes is irrelevant. While every other route to tax-efficient giving got narrower this year, this one did not move at all.
If you have a donor file with a meaningful number of people over 70, a QCD-specific communication is probably the highest-return piece of writing you will do this December.
What to Put in the Year-End Appeal
Segment it. A single letter cannot serve donors whose incentives moved in opposite directions.
And one line to keep out of all of them: do not tell a donor what their deduction will be. You do not know their AGI, their other giving, or their filing position, and the floor makes the answer depend on all three. Describe the rule, say it depends on their own circumstances, and point them at their tax advisor. That sentence protects the organization and costs you nothing.
What Your Acknowledgment Letters Have to Say
The substantiation rules did not change for 2026, which means the only thing standing between your donor and their deduction is whether your letter is correct. The IRS guidance on substantiating contributions sets out what is required.
- $250 or more: the donor must obtain and keep a contemporaneous written acknowledgment. Below that, a bank record is enough, but send one anyway.
- The letter must state whether goods or services were provided in consideration for the contribution, and if any were, it must include a good faith estimate of their value. The familiar sentence "no goods or services were provided in exchange for this gift" is how charities satisfy that requirement. It is the sector's convention rather than quoted IRS wording, so do not present it as a required phrase, and do not leave it out.
- Timing: the donor must have the acknowledgment no later than the date they file their return for the year of the gift. In practice that means getting everything out in January.
- Quid pro quo over $75: where a donor gives more than $75 and receives something in return, you must provide a written disclosure telling them the deductible amount is limited to the excess over the value of what they received, with a good faith estimate of that value. Note the threshold is in excess of $75, not $75 or more. Gala tickets, auction items and member benefits all land here.
For noncash gifts, the thresholds on the donor's Form 8283 are worth knowing so you are not surprised by the request:
A note on the signature: signing Section B acknowledges receipt. It is not your agreement with the claimed value, and you should not let a donor treat it as though it were.
Bottom Line
- The non-itemizer deduction is the headline, it is permanent, and it is cash to public charities only. Describe it as sitting on top of the standard deduction, not as reducing AGI.
- The 0.5% floor quietly removes the deduction for modest itemized giving, and the below-floor amount usually does not carry forward.
- The 1% corporate floor is an all-or-nothing cliff and the likeliest place you lose real money in 2027.
- QCDs are untouched at $111,000, which makes them the best story you have for donors over 70.
- Segment the appeal, because your donors moved in opposite directions this year.
- And get the acknowledgment letters right, because they are the part of this you actually control.
Orbit Accountants handles charitable substantiation, Form 990 reporting and year-end planning for exempt organizations as part of our nonprofit bookkeeping service, including reviewing acknowledgment templates before the December run.
Frequently Asked Questions
What are the new rules for charitable giving in 2026?
Four changes took effect for tax years beginning after December 31, 2025. Donors who do not itemize can deduct up to $1,000, or $2,000 jointly, for cash gifts to public charities. Itemizers can only deduct contributions above 0.5% of their contribution base. Itemized deductions are capped at an effective 35 cents per dollar for top-bracket taxpayers. And corporations can only deduct contributions above 1% of taxable income. The 60% of AGI ceiling for cash gifts to public charities was made permanent.
Can you deduct charitable donations without itemizing in 2026?
Yes. Under IRC 170(p) a taxpayer taking the standard deduction can deduct up to $1,000, or $2,000 on a joint return, for cash contributions to public charities. It is permanent. Gifts of appreciated securities or property do not qualify, nor do contributions to donor advised funds or section 509(a)(3) supporting organizations. There is no carryforward of any unused amount.
Does the new charitable deduction reduce AGI?
No, despite being widely described as an above-the-line deduction. Section 170(p) operates through IRC 63(b)(4), which subtracts it from adjusted gross income in arriving at taxable income rather than in arriving at AGI. IRC 63(d)(2) also confirms it is not an itemized deduction. The accurate description is that it is claimed in addition to the standard deduction and leaves AGI unchanged, which matters to any donor relying on an AGI-based threshold elsewhere on their return.
What is the 0.5% charitable deduction floor?
For tax years beginning in 2026, an itemizing taxpayer may deduct only the portion of total charitable contributions exceeding 0.5% of their contribution base, which is AGI computed without any net operating loss carryback. It applies to all contribution types. At $200,000 of AGI the floor is $1,000, so a donor giving $10,000 deducts $9,000.
Do amounts below the 0.5% floor carry forward?
Usually not, despite common claims to the contrary. IRC 170(d)(1)(C) carries the floor-disallowed amount forward only from a year in which the taxpayer also exceeded the applicable AGI percentage limitation. A donor comfortably below the 60% ceiling, which is most donors, simply loses the amount below the floor. Whether pre-2026 carryovers are themselves subject to the floor is genuinely unsettled, with reputable firms disagreeing.
What is the QCD limit for 2026?
$111,000 per taxpayer, up from $108,000 in 2025, available from age 70 1/2 and indexed for inflation under SECURE 2.0. A figure of $115,000 circulating for 2026 is not supported. Because a qualified charitable distribution is an exclusion from income rather than a deduction, it is unaffected by the 0.5% floor and the 35% cap, and it does not depend on the donor itemizing.
What must a donation acknowledgment letter include?
For a gift of $250 or more the donor needs a contemporaneous written acknowledgment, and it must state whether the organization provided any goods or services in consideration for the contribution, with a good faith estimate of their value if it did. The donor must have it no later than the date they file their return for the year of the gift. Separately, where a donor contributes more than $75 and receives something in return, the organization must provide a written disclosure stating that the deductible amount is limited to the excess over the value received.
How did the 2026 changes affect corporate donors?
A corporation may now deduct charitable contributions only to the extent they exceed 1% of taxable income, with the existing 10% of taxable income ceiling unchanged above that. Amounts below the 1% floor carry forward only where contributions also exceeded the 10% ceiling, so for most companies stuck under the floor there is no carryover. It is an all-or-nothing threshold rather than a gradual reduction, and some corporate givers are expected to shift support into sponsorship, which remains deductible as an ordinary business expense.
Can Orbit Accountants review our donor acknowledgment templates?
Yes. We review acknowledgment and quid pro quo disclosure templates against the current substantiation requirements before the year-end run, handle Form 8283 donee signatures and noncash gift records, and prepare Form 990 reporting. That sits within our nonprofit bookkeeping service on a fixed monthly fee.
Legal Disclaimer
This article is for general information only and is not tax or legal advice. It reflects the Internal Revenue Code, IRS guidance and IRS forms as of [publish date], and some provisions discussed here are new for the 2026 tax year with limited interpretive guidance so far. Nothing here should be given to a donor as advice about their own return, and individual outcomes depend on adjusted gross income, filing status and total giving. Please speak with a qualified tax professional about your own position. Reading this article does not create a client relationship with Orbit Accountants.
