Giving to Healthcare in 2026: What’s Changed—and How to Adapt

Here’s a clear, practical way to navigate the new charitable deduction rules that take effect beginning with the 2026 tax year — including how limits work and how to calculate the deduction for someone with an AGI of $100,000 giving $10,000 to a qualified charity.

What’s Changed for Charitable Deductions (Effective 2026)

0.5% AGI Floor for Itemizers

If you itemize deductions, you can only deduct the portion of your charitable gifts that exceeds 0.5% of your adjusted gross income (AGI). That means the first 0.5% of your AGI doesn’t count toward your deduction. For a $100,000 AGI, that floor is $500.

60% AGI Maximum for Cash Gifts

You can still deduct cash contributions to qualified public charities up to 60% of your AGI — $60,000 on a $100,000 AGI — but the 0.5% floor still applies first.

New Above-the-Line Deduction for Non-Itemizers

For taxpayers not itemizing (taking the standard deduction), there is now an above-the-line deduction for qualified cash donations:

• Up to $1,000 for single filers
• Up to $2,000 for joint filers
  This applies only to cash gifts to qualified public charities and not to donor-advised funds or private foundations.

Cap on Itemized Deduction Benefits

For high-income taxpayers in the top bracket, the tax benefit of itemized deductions (including charity) is capped at 35% of the deduction instead of 37%.

Example: AGI $100,000, Donation $10,000 (2026 Rules)

Let’s assume:

• AGI: $100,000
• Charitable Cash Contribution to a Qualified Charity: $10,000
• The taxpayer plans to itemize deductions.

Step-by-Step Calculation

1. Calculate the Floor
   0.5% of $100,000 = $500 (amount that doesn’t count)
2. Subtract the Floor from the Donation
   $10,000 – $500 = $9,500
   This is the deductible amount allowed under the new floor rule (as long as the 60% max isn’t exceeded).
3. 60% AGI Limit Check
   60% of $100,000 = $60,000 → well above $9,500, so the full $9,500 is within the limit.

Deductible charitable contribution: $9,500

If you were instead a standard deduction filer, you could claim up to $1,000 above the line (subject to the specific requirements) — but that doesn’t apply here because the donation is larger than $1,000 and the itemized deduction is more beneficial.

Key Planning Points

• Timing matters: Under the current (pre-2026) rules, the full $10,000 donation would be fully deductible up to 60% of AGI. The new floor doesn’t apply until 2026.
• “Bunching” strategy: If your donations hover near the floor, you might consider combining multiple years of giving into one year to exceed the floor and maximize deductions.
• Carryover: Excess charitable contributions beyond AGI limits can generally be carried forward up to five years (subject to IRS rules).

Summary

Feature	Before 2026	Beginning 2026
AGI floor	None	0.5% of AGI applies for itemizers
Cash gift limit	60% of AGI	60% of AGI
Deduction for non-itemizers	None	Up to $1,000 (single) / $2,000 (joint)
Cap on itemized deduction benefit	37% for top rate	35% for top rate

 

Here is a clear, simple walk-through of how Donor-Advised Funds (DAFs) and Qualified Charitable Distributions (QCDs) work under the new charitable rules taking effect in 2026, and how they compare for someone like your example taxpayer ($100,000 AGI giving $10,000).

Donor-Advised Funds (DAFs)

A DAF is a charitable account where you contribute money now, take the tax deduction now, and give the money to charities later.

How DAFs Work

1. You contribute cash or appreciated assets (stock, mutual funds, etc.) to the DAF.
2. You get a charitable deduction in the year you contribute.
3. The money can be granted to qualified charities at any time in the future.

2026 Rule Changes That Affect DAFs

Change	Impact on DAFs
0.5% AGI floor (itemizers)	Applies — your DAF contribution is subject to the same floor as direct gifts.
60% AGI limit for cash gifts	Applies normally.
Above-the-line deduction for non-itemizers	DAF donations do NOT qualify (must be direct gifts to public charities).
Appreciated securities deduction rules	Unchanged (generally 30% AGI limit).

Example with DAF

AGI = $100,000
DAF contribution = $10,000

• 0.5% floor = $500
• Deductible amount = $10,000 − $500 = $9,500

Same result as giving directly to the charity.

When a DAF is ideal

• You want to bunch multiple years of giving into one for tax efficiency.
• You have a large income year (bonus, sale of property).
• You want to donate appreciated stock and avoid capital gains.
• You want time to decide which charities to support.

Qualified Charitable Distributions

A QCD is a direct transfer from an IRA to a charity — available once you turn 70½.

How QCDs Work

1. You instruct your IRA custodian to transfer up to $108,000 per year (indexed) directly to a qualified charity.  Each spouse can contribute up to $108,000 from their individual IRA's.
2. The amount does NOT count as taxable income.
3. It can satisfy all or part of your RMD (required minimum distribution).

Why QCDs Are Powerful

• You don’t need to itemize.
• There is no 0.5% AGI floor.
• QCDs reduce AGI, which can also reduce:
  • Medicare premiums
  • Social Security taxation
  • Phase-outs in other deductions

Example with QCD

AGI (before QCD): $100,000
QCD made: $10,000

• The $10,000 never enters AGI.
• New AGI = $90,000
• No deduction is taken — the benefit is the income exclusion.

This is far more powerful than a deduction for many retirees.

When QCDs are a great strategy

• Age 70½ or older
• Have Required Minimum Distributions (RMDs)
• Want to lower AGI
• Do not itemize deductions
• Want to avoid the new 0.5% charitable floor (QCDs skip the rules completely)

Comparing Strategies for a $10,000 Gift (AGI $100,000)

Strategy	Effect	Best for
Direct cash gift (itemizing)	Deduction = $9,500 after AGI floor	Most taxpayers under age 70½
DAF contribution	Deduction = $9,500; allows giving later	Those who want flexibility or to donate appreciated assets
Above-the-line (standard deduction)	Max $1,000 single / $2,000 joint (not DAF)	Standard deduction filers
QCD from IRA	$10,000 never counts as income	Age 70½+; retirees with RMDs

 

This information is not intended as legal or tax advice. Please consult your professional advisors for guidance tailored to your circumstances.