Charitable Deduction Changes 2026: QCDs, DAFs and Bunching

Charitable deduction changes for 2026: itemizers lose the first 0.5% of AGI in gifts, top-bracket deductions shrink, and non-itemizers get up to $1,000.

The 2025 tax law (Public Law 119-21) changed how charitable gifts reduce your tax for tax years beginning after December 31, 2025. Gifts you make in 2026 are the first ones measured under the new rules. The familiar tools still work. What changed is which tool fits which household.

What are the charitable deduction changes in 2026?

There are three changes for individuals and one for C corporations.

Contribution base

Your adjusted gross income (AGI), figured without any net operating loss carried back to the year.

Qualified charitable distribution (QCD)

A gift sent directly from your IRA trustee to a qualifying charity once you are 70 1/2 or older. It is left out of income instead of deducted.

Donor-advised fund (DAF)

An account held by a charity, called the sponsoring organization. Your deduction is figured for the year you give to it, subject to the usual AGI percentage limits, the charity takes legal control, and you recommend grants later.

Bunching

Giving two or more years of donations in one tax year, so you itemize that year and take the standard deduction in the others.

The 0.5% floor

The floor works like a deductible. Take 0.5% of your contribution base off the top of the year's gifts, and only the rest is deductible. A couple with $500,000 of AGI gives up the deduction on the first $2,500. At $2,000,000 of AGI, it is the first $10,000.

The amount under the floor is usually gone for good. It carries forward only in a year when your gifts also exceed the AGI percentage limits on charitable deductions.

The 2/37 limit for the top bracket

For the 2026 tax year, the 37% rate applies to taxable income over $768,700 for married couples filing jointly and over $640,600 for single filers. The new rule looks at your taxable income figured before itemized deductions. If that number passes the 37% line, your itemized deductions are cut by 2/37 of the smaller of two amounts: the deductions themselves, or the income above the line. The limit can apply even when your final taxable income lands below the 37% bracket. The result is that itemized deductions, gifts included, reduce less tax at the top bracket than they did in 2025, and how much less depends on where your income and deductions fall against the 37% line. The rule covers all itemized deductions, not only gifts, and applies after every other limit.

The deduction for non-itemizers

For the 2026 tax year, the standard deduction is $32,200 for married couples filing jointly. For 2025, a household taking it got no separate federal deduction for gifts. Starting in 2026, it can deduct up to $1,000 of cash gifts, or $2,000 on a joint return, to eligible public charities. Gifts to donor-advised funds and supporting organizations are excluded, and the 0.5% floor does not apply.

The new rules leave charitable giving on the table. They change which year, which account and which vehicle gets the most from each dollar you give.

Who should use a QCD in 2026?

If you are 70 1/2 or older with a traditional IRA, start here. For the 2026 tax year, up to $111,000 can go from your IRA straight to charity without counting as income. On a joint return, your spouse can do the same from his or her own IRA. One catch: deductible IRA contributions for the year you turn 70 1/2 or any later year reduce your QCD exclusion, but only to the extent they have not already reduced an earlier year's exclusion.

Because a QCD is excluded from income, it is not a deduction at all. The 0.5% floor and the 2/37 limit never reach it, and you keep the full standard deduction. A QCD also counts toward your required minimum distribution (RMD), which generally starts at age 73. We cover that pairing in RMD tax planning at age 73.

A lower AGI can also keep you under the income tiers that raise Medicare premiums (the income-related monthly adjustment amount, or IRMAA).

Three rules trip people up:

• The money must go directly from the IRA trustee to the charity.
• A QCD cannot go to a donor-advised fund or a supporting organization.
• It cannot come from an ongoing SEP or SIMPLE IRA.

A QCD is excluded from income instead of deducted, so none of the new limits on charitable deductions reach it.

How does bunching work under the 0.5% floor?

Bunching already made sense for households whose deductions sit near the standard deduction. The floor adds a second reason: it is charged once for each year you give, so two years of gifts in one year means paying it once instead of twice.

Take a hypothetical couple with $400,000 of AGI each year, $20,000 of other itemized deductions, and $30,000 a year of giving. Their floor is $2,000 a year. For simplicity, the table uses 2026 figures for both years.

Same total giving, $14,200 more in deductions over two years. Additional cash given directly to a public charity in Year 2 could add up to $2,000 more in deductions, though it would also raise total giving. This illustrates the mechanism and projects no one's result; your numbers depend on your income, deductions and state.

With the state and local tax (SALT) deduction cap at $40,400 for the 2026 tax year (it phases down once modified AGI passes $505,000), many high-earning couples itemize on taxes and mortgage interest alone. For them the floor reduces every gift, every year.

The floor is charged every year you give. Bunching means you pay it less often.

Where does a donor-advised fund fit?

A donor-advised fund lets you bunch without changing when charities get the money. You fund two or three years of giving in one tax year and claim the deduction for that year, then recommend grants on your normal schedule. Three limits apply:

• It is an itemized gift, so the 0.5% floor, the AGI percentage limits on charitable deductions and, near the top bracket, the 2/37 limit all apply. A gift too large for one year's AGI limit carries forward for up to five years.
• It does not count toward the $1,000 or $2,000 non-itemizer deduction.
• It cannot receive a QCD. Donors over 70 1/2 can use QCDs for direct gifts and a fund for appreciated assets.

If you funded a donor-advised fund in late 2025 to get ahead of the new rules, that gift was deductible for 2025 if you itemized, with any amount over the AGI limits carried forward. Grants the fund makes in 2026 create no second deduction.

Which charitable tool fits which household?

What should you decide before December 31, 2026?

A gift counts in the year payment is made, so December 31, 2026 is the line for this tax year. Before then:

1. Will you itemize in 2026? Total your itemized deductions after the 0.5% floor and other limits, then compare that with your standard deduction plus any non-itemizer deduction for cash gifts.
2. Is this a bunching year? A higher-income year, such as the year you sell a business, raises the floor but can also raise what each deducted dollar saves, until income before itemized deductions reaches the 37% bracket and the 2/37 limit applies.
3. Are you 70 1/2 or older? Use QCDs for gifts you would make anyway. See reducing taxes on IRA withdrawals for how they fit a distribution plan.
4. Who is running the numbers? The giving decision happens months before your CPA files. Coordinating your CPA, advisor and attorney keeps the plan and the return in step.

Anchor provides tax strategy and planning coordination, not tax preparation or legal advice, so keep your own CPA and attorney involved. The figures above are adjusted annually or set by statute; confirm the current-year number before acting.

Frequently asked questions

Does the 0.5% floor apply to a QCD?

No. A QCD is excluded from income and is not counted in your charitable deduction, so the floor never touches it.

Can I take the non-itemizer deduction for a gift to my donor-advised fund?

No. It covers cash gifts to eligible public charities only. Donor-advised funds and supporting organizations are excluded.

Can my spouse and I each make a QCD?

Yes. Each IRA owner 70 1/2 or older has a separate annual limit, $111,000 for the 2026 tax year. Deductible IRA contributions for the year you turn 70 1/2 or any later year reduce the exclusion, but only to the extent they have not already reduced an earlier year's exclusion, so check that history first.

Does the 2/37 rule apply only to charitable gifts?

No. It reduces total itemized deductions, including state and local taxes and mortgage interest, once taxable income figured before those deductions passes the start of the 37% bracket.

Is the amount lost to the floor carried forward?

Usually not. It carries forward only in a year when your gifts also exceed the AGI percentage limits on charitable deductions.

Sources

1. 26 U.S. Code § 170 (Cornell Legal Information Institute): the 0.5% floor, contribution base, floor carryover, non-itemizer deduction, C corporation floor, payment-year rule and 2026 effective date.
2. 26 U.S. Code § 68 (Cornell Legal Information Institute): the 2/37 reduction of itemized deductions.
3. IRS Topic no. 506, Charitable contributions: the $1,000 ($2,000 joint) non-itemizer deduction from tax year 2026.
4. IRS, Working Families Tax Cuts provisions: the non-itemizer deduction is cash only and excludes donor-advised funds.
5. Internal Revenue Bulletin 2025-49 (Notice 2025-67, 2026 cost-of-living adjustments): the $111,000 QCD limit.
6. 26 U.S.C. 408(d)(8)(B)(ii) (Cornell Legal Information Institute): QCD age 70 1/2, direct transfer, excluded recipients, no separate deduction.
7. IRS, Retirement plans FAQs regarding IRA distributions: QCDs can satisfy an RMD.
8. IRS Publication 590-B: each spouse on a joint return can make a QCD.
9. IRS Retirement Topics, Required Minimum Distributions (RMDs): RMDs generally begin at age 73.
10. IRS news release IR-2025-103, tax year 2026 inflation adjustments: standard deduction and 37% bracket thresholds.
11. 26 U.S. Code § 164, Taxes (Cornell Legal Information Institute): the 2026 SALT cap and phase-down threshold.
12. IRS, Donor-advised funds: how a sponsoring organization holds the fund.