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Major Changes to Charitable Contribution Deductions (2026 and Beyond)

What High-Income Taxpayers, Business Owners & Creators Need to Know

Significant changes are coming to the federal charitable contribution rules beginning in 2026. These changes affect both itemizers and nonitemizers — and planning in 2025 may be critical.

At Velin & Associates, Inc., CPA Los Angeles, we are already discussing these changes with doctors, dentists, YouTubers, Amazon sellers, and high-income professionals who make substantial annual donations.

Below is a breakdown of what is changing — and what it means for you.

1. New Charitable Deduction for Nonitemizers (Starting 2026)

Beginning in 2026, taxpayers who do NOT itemize will be able to deduct:

This applies to cash contributions made to qualified charitable organizations.

Important limitations:

Why This Matters

Many younger professionals and business owners take the standard deduction. Previously, they received no tax benefit for charitable giving.

Now they will.

Example – Creator / Influencer

A Los Angeles YouTuber with $120,000 income who claims the standard deduction donates $1,500 cash to a public charity in 2026.

They may deduct $1,000 of that contribution even without itemizing.

This creates modest but meaningful tax savings.

2. 60% Cash Contribution Limit Permanently Extended

The 60% of AGI limitation for cash donations to qualified public charities has now been made permanent.

Previously, this higher limit was temporary.

This is particularly relevant for:

Example – High-Income Medical Professional

A physician in Los Angeles has AGI of $900,000 in 2026 and donates $400,000 in cash to a hospital foundation.

Because of the 60% limit, they may deduct up to $540,000 (60% of $900,000), meaning the full $400,000 is deductible — subject to the new 0.5% floor explained below.

3. NEW 0.5% AGI Floor for Itemizers (Beginning 2026)

This is the most important change.

Starting in 2026, charitable contributions are deductible only to the extent they exceed 0.5% of AGI.

In other words, a small portion of your donations becomes nondeductible.

How It Works

You must reduce your total charitable contributions by:

0.5% × AGI

before calculating the deduction.

Example – High Earner (Dentist / E-Commerce Founder)

Hector has:

0.5% of AGI = $2,250

Deductible amount = $14,000 – $2,250 = $11,750

$2,250 becomes nondeductible due to the new floor.

For high-income individuals, this reduction can be meaningful.

4. Ordering Rules – Why Donation Type Matters

The IRS will apply the 0.5% floor first to donations that produce a lower deduction percentage (such as capital gain property limited to 20% or 30%).

This means planning the type of asset you donate becomes even more important.

Example – Mixed Donations

Same taxpayer (AGI $450,000) donates:

The 0.5% floor ($2,250) is applied first to the capital gain property donation.

Final deduction = $11,750

Strategic takeaway: donation composition now affects deduction efficiency.

5. Planning Strategies Before 2026

Because the 0.5% floor begins in 2026, 2025 planning becomes critical.

Strategy #1 – Accelerate Donations Into 2025

If you are planning large gifts, consider making them in 2025 before the AGI floor takes effect.

This is particularly relevant for:

Strategy #2 – Qualified Charitable Distributions (QCDs)

Taxpayers age 70½+ can:

This is extremely powerful for retirees with large IRA balances.

6. Veterans Service Organization (VSO) Changes

The VSO Equal Treatment Tax Act expands which veterans organizations can receive deductible contributions.

Previously, some VSOs were excluded if more than 10% of members were not classified as wartime veterans.

That restriction has been removed.

Beginning with tax years after December 12, 2024:

Donations to federally chartered veterans service organizations are deductible.

7. Special Rule – Native American Subsistence Whaling

Beginning 2026, the charitable deduction for qualified subsistence whaling activities increases from $10,000 to $50,000.

This affects a narrow group of taxpayers but reflects expanded charitable deduction categories.

8. California Nonconformity

This is critical for our Los Angeles clients.

California does NOT conform to:

This means:

Federal and California charitable deductions may differ starting in 2026.

Proper tax planning and projection will be necessary.

Why This Matters for Our Clients

These changes affect:

For clients with volatile income (creators, entertainment professionals, online commerce founders), timing charitable contributions may significantly impact tax savings.

For high-income professionals, even a 0.5% AGI floor can mean thousands of dollars in lost deductions if not planned correctly.

Final Thoughts

Charitable giving is no longer just about generosity — it now requires precise tax strategy.

If you are:

2025 and 2026 planning will look very different. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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