Charitable Giving in 2026: 3 Ways to Work Around the New 0.5% AGI Floor

The rules for deducting charitable donations changed this year. Starting in 2026, if you itemize, the first 0.5% of your adjusted gross income (AGI) in charitable gifts isn't deductible. The good news is that a little planning can keep most of your giving tax-efficient.

How the new 0.5% floor works

Add up your charitable gifts for the year, then subtract 0.5% of your AGI. Only the amount above that is deductible. For example:

• AGI of $200,000: the first $1,000 isn't deductible.

• AGI of $500,000: the first $2,500 isn't deductible.

• AGI of $1,000,000: the first $5,000 isn't deductible.

In most cases the disallowed amount is simply lost. It only carries forward if your giving also goes over the normal annual AGI limits. If you're in the top 37% bracket, a separate new rule also caps the tax benefit of itemized deductions at 35 cents per dollar.

Strategy 1: Bunch your donations

The floor applies every year. If you give the same amount every year, you lose part of your deduction every year. Bunching two or more years of giving into a single year means you only hit the floor once.

Say a married couple with $500,000 of AGI gives $15,000 a year. Giving annually, they lose $2,500 of deductions each year, or $5,000 over two years. If they give $30,000 every other year instead, they lose $2,500 once. Bunching also makes it easier for your total itemized deductions to beat the standard deduction ($32,200 for married couples in 2026), so your gifts count at all.

A donor-advised fund (DAF) makes bunching easy. You take the full deduction in the year you put money into the fund, then send grants to your favorite charities over the next few years. The charities still get steady support.

Strategy 2: Give appreciated stock instead of cash

If you own stocks or mutual funds that have gone up in value and you've held them for more than a year, donate the shares directly instead of writing a check. You generally get a deduction for the full market value, and nobody pays capital gains tax on the growth. For high earners, that avoids a tax of up to 23.8% on the gain. The 0.5% floor still applies to the deduction, but you skip a tax you would have paid if you'd sold the shares first.

Donations of appreciated stock are limited to 30% of your AGI each year. Anything over that carries forward for up to five years.

Strategy 3: Use a qualified charitable distribution if you're 70½ or older

A qualified charitable distribution (QCD) sends money straight from a traditional IRA to a charity, up to $111,000 in 2026. The money never counts as income, so the 0.5% floor doesn't apply and you don't need to itemize. A QCD can also count toward your required minimum distribution. One catch: QCDs can't go to a donor-advised fund.

A bonus for years you don't itemize

Also new in 2026: if you take the standard deduction, you can still deduct up to $1,000 ($2,000 for married couples) of cash gifts to charity. Gifts to donor-advised funds don't qualify. This pairs well with bunching. Itemize in your big giving year, then take the standard deduction plus this extra deduction in the years in between.

Plan before December 31

Gifts count in the year you make them, so year-end is the time to decide how much to give and how. Stock transfers and new donor-advised fund accounts can take a week or more to set up, so it's best to start early.

Frequently asked questions

Does the 0.5% floor apply if I take the standard deduction?

No. The floor applies to itemized charitable deductions. People who take the standard deduction get the separate $1,000 or $2,000 deduction for cash gifts instead.

Do qualified charitable distributions count toward the floor?

No. A QCD is left out of your income entirely, so the floor doesn't touch it.

Is a donor-advised fund worth it?

If you give regularly and want to bunch several years of donations into one year, a DAF is one of the simplest ways to do it.

Not sure which approach fits your situation? Reach out to Bottala Tax & Advisory at info@bottalacpa.com or (626) 244-8895, and we'll help you plan your giving before year-end.