Many charities advertise that donations are tax-deductible, but most people don’t deduct donations on their taxes. That’s because over 80% of taxpayers use the standard deduction, and they don’t get to deduct donations to charities when they don’t itemize. People donate because they support the cause, whether they get a tax deduction or not.
I’m in the 80%. I don’t track my donations because I know I won’t deduct them.
This will change in 2026.
New Deduction When You Don’t Itemize
Some of you may recall that Congress allowed people who don’t itemize deductions to still deduct a small amount of their charitable donations during COVID. It was originally a one-off $300 deduction in 2020 (see CARES Act 2020 Charity Donation Deduction: $300 or $600 for Married?). Congress re-created it with some tweaks as another one-off for 2021 (see 2021 $300 Charity Deduction When You Don’t Itemize).
The new 2025 Trump tax law resurrected the 2021 version and raised the allowed amount from $300 to $1,000 ($2,000 for married filing jointly). It’ll be ongoing this time, starting in 2026 (not 2025), with no preset end date.
All the other terms from 2021 are carried over to this new iteration. This deduction is only for people who take the standard deduction. The donations must be in cash, not necessarily physical cash, but not in household items, cars, stocks, bonds, mutual funds, ETFs, or crypto. Checks, card payments, and bank debits are all OK. The donations must be made directly to charities, not to a donor-advised fund.
There’s no income limit or phaseout. All other requirements about charity donations still apply, including getting a written acknowledgment with all the required elements.
Some places reported that this deduction is “above the line.” It’s not true. This new deduction doesn’t lower your AGI. It doesn’t make it easier for you to qualify for other tax breaks. It doesn’t affect state taxes. See Tax Deductions: Above-the-Line, Itemized, and Neither for the differences in various types of tax deductions.
Lower Deduction When You Itemize
If you itemize deductions, this new $1,000/$2,000 deduction isn’t available to you. You’ll continue to include your charity donations as itemized deductions on Schedule A. However, the new 2025 Trump tax law adds a floor for your charitable contributions deduction at 0.5% of your AGI, also starting in 2026 (not 2025), with no preset end date.
This floor is similar to how the medical expenses deduction has a floor at 7.5% of AGI. It reduces the amount you can deduct by 0.5% of your AGI. For example, suppose your AGI is $100,000. 0.5% of $100,000 is $500. After this change goes into effect in 2026, when your total donations to charities add up to $4,000, you can deduct only $3,500 as an itemized deduction.
Accelerating your planned donations in future years to 2025 will avoid having your deduction reduced by 0.5% of AGI each year.
QCD
The new 2025 Trump tax law didn’t make any changes to Qualified Charitable Distributions (QCDs).
If you’re over 70-1/2, QCDs out of a Traditional IRA continue to be the best way to donate to charities. QCDs count toward the RMD, but they don’t raise your AGI. You don’t have to itemize to make QCDs. Nor are you required to reduce the amount by 0.5% of AGI. The annual limit for QCDs is 100 times higher than this new $1,000/$2,000 deduction for people who don’t itemize. It’s too bad that only those 70-1/2 and older can do QCDs.
The only thing is that QCDs can’t go to a donor-advised fund. If you ask the IRA custodian to make payments to the charities, they’ll show a total as QCDs on the year-end 1099 form. Do them early in the year before you take any other distributions out of the Traditional IRA, including Roth conversions. Make sure the charities cash the checks before December 31.
You can also write checks from your IRA and send them to charities yourself, but your IRA custodian won’t know which checks you wrote are QCDs. They won’t be able to indicate them as such on the 1099 form. You’ll have to keep track of them yourself and report what amount from the total distributions on the 1099 form was QCD.
Naturally, because QCDs are excluded from your income to begin with, you can’t deduct QCDs again either toward this new $1,000/$2,000 deduction when you don’t itemize or as a part of the itemized deductions.
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You’ll find more deep dives on recent changes from the 2025 Trump tax law in the full OBBBA series.
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Rick Thompson says
Thanks for this helpful information. I think many folks are incorrectly assuming that the new $1,000 ($2,000 MFJ) Charity Deduction starts in 2025, like most other provisions of the OBBBA.
And, thanks for reminding folks of the many advantages of QCDs. I take it that QCDs will have no impact on still getting the new $1,000 Charitable Deduction for non-QCD donations, and that QCDs themselves do count towards the new $1,000 Charitable Deduction.
Harry Sit says
You can do both QCDs and non-QCD donations and still get the deduction for non-QCD donations, but QCDs do NOT count toward the $1,000 deduction or for that matter, itemized deductions.
Steve Wagner says
Thank you Harry, well done. I just started QCDs and they are a bit of work. I believe donors who make these need to be prepared that recipient charities will only report total amounts received without differentiating between the two. Also, shouldn’t we say QCDs are not deductible under any circumstance?
Harry Sit says
I thought it was a given that you can’t double-dip but I’ll make it doubly clear.
Rita Glickman says
Re: QCD.
True they are never deductible. But record-keeping to avoid being taxed by the IRS needs to be maintained – not by the charity receiving the distribution – but by the donor when filling out income tax forms. There is a place to indicate what part of the RMD for the year is a Qualified Charitable Distribution. Income Tax prep software leads you through how to identify what part of the distribution is a QCD.
Solid work as usual – Harry Sit!
Derek castle says
Thanks Harry. As always , very helpful. I am interested in your comments that the new $1,000/ $2,000 charitable donations will not be above the line/ will not reduce AGI. I have checked literally dozens of websites from reputable financial institutions and financial advisors and every one of them says it will be above the line. Do you have any source/ s that you can quote regarding it not being above the line? This will be an important tax question for many in 2026. Thanks. Derek
Harry Sit says
Those other places use “above the line” as a shorthand for “itemizing not required.” The two concepts used to cover the same set of deductions. Only above-the-line deductions didn’t require itemizing, and therefore not requiring itemizing must have been above the line. This is no longer the case. Some deductions are below the line (don’t reduce AGI) but still don’t require itemizing. This new charity donation deduction for non-itemizers is one of them.
The section in OBBBA is very short:
“SEC. 70424. Permanent and expanded reinstatement of partial deduction for charitable contributions of individuals who do not elect to itemize.
(a) In general.—Section 170(p) is amended—
(1) by striking “$300 ($600” and inserting “$1,000 ($2,000”, and
(2) by striking “beginning in 2021”.
(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.”
It amends the 2021 version by changing only the amount and the date. You can look at the 2021 Form 1040 to see where it was placed and how it didn’t reduce AGI.
https://www.irs.gov/pub/irs-prior/f1040–2021.pdf
Now you know which sources are loose with their terminology. In general, financial institutions and financial advisors aren’t good sources for tax information.
Derek castle says
Thanks a lot Harry. I can see that the OBBB Act is only modifying the Code 170p 2021 language, and that 2021 ( unlike 2020) was not above the line. It is a shame that there is so much misinformation about this. It is not just in one or two places , it is ubiquitous. For us QCDs have been really useful. However the new “not above the line” deduction will also be very useful, especially for small donations , or spur of the moment donations, where it would be a hassle to get FIdelity to send a check. While this deduction will not reduce our AGI ,we have no tax breaks with an AGI issue. While most of our large donations next year will be QCDs, we will also use the new deductions for smaller donations via check or credit card where we can just have our financial institution record and not always need to bother the charity with getting a receipt ( unless it is physical cash).
Thanks again for all your valuable information Harry.
Rick Thompson says
Thanks for updating the section on QCDs. Prior to reading your update, I did not know about the new (and long-overdue) IRS requirement that traditional IRA custodians must now indicate the QCD amount on Form 1099-R.
Derek says
Thank you for the great info. Could you clarify if the 0.5% floor applies only to those who itemize charitable contributions or also to the non-itemizers who take advantage of the $1000/$2000 deduction after this year?
Harry Sit says
The 0.5% floor applies only to itemizers.
Jeremy says
Sorry if this is a silly question, so it’s not “above the line” does that mean it’s a credit? (subtract amount donated from tax due?) I appreciate your work and read both it and the linked above/below/neither pieces but am still confused. Thanks!
Harry Sit says
It’s not a credit. It reduces your taxable income, which lowers your tax by a percentage, but it doesn’t lower your AGI to make you qualify for other things.