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Anna Efetova | Moment | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
As year-end approaches, it’s easy to overlook how last-minute income boosts could have a surprise impact on your taxes<\/a>.<\/p>\n Starting in 2026, some taxpayers could see a smaller charitable deduction<\/a> as their earnings climb, due to changes from President Donald Trump<\/a>‘s “big beautiful bill<\/a>.” <\/p>\n An increase in income might come from selling assets<\/a>, converting a pretax individual retirement account to a Roth IRA<\/a> or getting a bonus<\/a>, for example. Taxpayers would see the smaller charitable tax break when filing their tax returns in 2027.<\/p>\n<\/div>\n Amid the legislative changes, tax and income planning has become “increasingly complex,” for clients, according to certified financial planner Ed Jastrem, senior planning specialist at Savant Wealth Management in Westwood, Massachusetts.<\/p>\n Here are some key things to know about the charitable deduction for 2026.<\/p>\n<\/div>\n Enacted in July 2025, Trump’s “big beautiful bill”<\/a> \u2014 a multitrillion-dollar tax and spending package \u2014 included changes to the charitable deduction <\/a>for taxpayers across the income spectrum.<\/p>\n When filing taxes, taxpayers claim the larger of the standard deduction \u2014 $16,100 for single filers or $32,200 for married couples filing jointly in 2026 \u2014 or their itemized tax breaks, which include the charitable deduction.\u00a0<\/p>\n But starting in 2026, there’s also a charitable tax break<\/a> for filers who don’t itemize, worth up to $1,000 for single filers and $2,000 for married couples. The deduction applies to cash contributions<\/a> made to eligible tax-exempt organizations.<\/p>\n<\/div>\n Here’s a basic illustration of the tax break’s value: For someone in the 22% tax bracket, a $1,000 deduction could reduce taxes by $220.<\/p>\n “That’s actually great for a lot of people” who previously didn’t get a tax benefit from smaller gifts to charity, Jastrem said.<\/p>\n But Trump’s legislation also made two changes for households that itemize their tax deductions \u2014 and those tweaks could shrink the charitable deduction for certain taxpayers, experts said.<\/p>\n<\/div>\n For 2026, there’s a charitable deduction “floor” for taxpayers who itemize their tax deductions,\u00a0which only allows the tax break once it exceeds 0.5% of their adjusted gross income<\/a>, or AGI. There wasn’t a floor prior to the 2025 tax law. <\/p>\n For example, if your AGI is $400,000 and you donate $10,000 in 2026, the 0.5% floor \u2014 or the first $2,000 \u2014 would not be eligible for the charitable deduction. In this example, there wouldn’t be any deduction if charitable gifts are less than the $2,000 floor.<\/p>\n An income boost via a Roth conversion, selling profitable investments or receiving a bonus could therefore have a surprising impact on the tax break, Jastrem said.<\/p>\n<\/div>\n The floor gets higher, so if you don’t adjust your giving plan, you’re potentially losing more and more of the deduction.<\/p>\n Ed Jastrem<\/p>\n senior planning specialist at Savant Wealth Management<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n “The floor gets higher, so if you don’t adjust your giving plan, you’re potentially losing more and more of the deduction,” he said.<\/p>\n Using the same example, if your AGI were to rise to $500,000 and you were to donate <\/strong>the same $10,000, the 0.5% floor would rise to $2,500 for 2026.<\/p>\n<\/div>\n Trump’s legislation also caps the charitable deduction for filers in the top income tax bracket<\/a>, a change that took effect starting this year.<\/p>\n Households in the highest federal income bracket pay a 37% top marginal income tax rate. But the legislation effectively caps the charitable deduction for these taxpayers at 35%, thereby limiting its value.<\/p>\n You’re “limited to saving 35% of each deductible dollar, which reduces tax benefits for those in the highest 37% tax bracket,” said Josh Norris, CFP and founder of LeFleur Financial in Jackson, Mississippi. <\/p>\n This change in combination with the 0.5% deduction floor “will make multiyear planning more important for clients,” such as the timing for their charitable contributions, said Norris, who is also a certified public accountant. <\/p>\n<\/div>\n Despite the latest charitable deduction changes, “there’s still a lot that we can do if you’re proactive,” said Jastrem, of Savant Wealth Management. “There’s definitely plenty of time [in 2026] to do some planning.” <\/p>\n For example, some financial advisors still recommend using so-called donor-advised funds<\/a>. <\/p>\n These funds work like a charitable checkbook, allowing taxpayers to make a large gift at one time but which dole out donations gradually over time. Typically, these accounts leverage a “bunching” strategy that combines multiple years of gifts into a single year for an up-front charitable deduction that’s transferred to the donor-advised fund. <\/p>\n After the transfer, taxpayers can invest and potentially grow the funds for future gifts to their public charity of choice. <\/p>\n<\/div>\n Maryna Terletska | Moment | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n Taxpayers should also consider “tax lot selection” \u2014 picking specific groups of assets based on the tax impact \u2014 when deciding which investments to donate, said Norris, of LeFleur Financial.<\/p>\n For example, it’s typically better to donate profitable investments from a brokerage account over cash from various accounts, since doing so means investors will avoid capital gains taxes, experts say. <\/p>\n But investors should try to use profitable investments owned for more than one year, known as “long-term capital gains assets,” Jastrem said. Relative to charitable contributions, these offer a bigger tax break than investments owned for one year or less, which are known as short-term capital gains assets, he said.<\/p>\n For long-term capital gains assets, you can generally deduct the current fair market value of the investment. By comparison, short-term capital gains assets are typically limited to the original purchase price, or cost basis. <\/p>\n<\/div>\n<\/div>\n\nRead more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
Trump’s legislation changed the charitable deduction <\/h2>\n
The charitable deduction ‘floor’ for itemizers<\/h2>\n
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Smaller deduction for highest tax bracket <\/h2>\n
Tax planning strategies for 2026<\/h2>\n
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