Charitable Deduction Changes for 2026: The Non-Itemizer Deduction, the 0.5 Percent Floor and the Corporate 1 Percent Floor

Three provisions of Public Law 119-21 change how charitable gifts are deducted for taxable years beginning after December 31, 2025. Individuals who take the standard deduction get a cash charitable deduction. Individuals who itemize lose the first 0.5 percent of their contribution base. Corporations lose the first 1 percent of taxable income. Year-end giving conversations in late 2026 should cover all three, because the best answer for a client is different from what it was in 2025.

What is the non-itemizer deduction?

Section 70424 amended section 170(p), the partial deduction for individuals who do not itemize. It replaced "$300 ($600" with "$1,000 ($2,000" and removed the language that had limited the provision to 2021. The change applies to taxable years beginning after December 31, 2025, and the IRS describes it as permanent.

The IRS summary of the provision sets out the limits:

• Up to $1,000 of cash contributions, or $2,000 for married couples filing jointly.
• Cash only. Gifts of clothing, stock or other property do not qualify.
• Contributions to donor-advised funds and supporting organizations do not qualify.
• Only contributions made during the tax year count. Carryovers from earlier years do not.

The deduction is taken in addition to the standard deduction. For a client who no longer itemizes, cash gifts to operating charities now produce a deduction up to the limit, so the receipts matter again.

What records does a non-itemizer need?

The usual substantiation rules still apply. IRS Tax Tip 2026-57 reminds taxpayers that contributions of $250 or more require a written acknowledgment from the organization, stating whether anything was provided in return, and that cash gifts need a bank record or written communication showing the organization, date and amount. Ask clients to keep these even if they expect to take the standard deduction.

What is the 0.5 percent floor for itemizers?

Section 70425 added section 170(b)(1)(I). An individual's charitable contributions otherwise allowable are allowed only to the extent the aggregate exceeds 0.5 percent of the taxpayer's contribution base for the year. IRS Publication 505 for 2026 describes the floor in terms of adjusted gross income and states that any amount under the floor cannot be deducted in 2026.

How is the floor applied across contribution types?

The statute applies the floor in a set order, taking contributions into account category by category:

1. Contributions under section 170(b)(1)(D).
2. Contributions under section 170(b)(1)(C).
3. Contributions under section 170(b)(1)(B).
4. Contributions under section 170(b)(1)(E).
5. Contributions under section 170(b)(1)(A).
6. Contributions under section 170(b)(1)(G), which covers cash contributions to organizations described in subparagraph (A).

Cash gifts under subparagraph (G) come last. The ordering matters for carryforwards, because each category has its own percentage limit and carryover rule, so the return should show which category absorbed the floor.

Can disallowed amounts carry forward?

Only in limited cases. New section 170(d)(1)(C) increases a carryforward by the amount disallowed by the floor only for a contribution year in which an excess is already being carried forward under a carryover rule, meaning the client already exceeded a percentage limit. For a client whose giving is within the AGI limits, the amount under the floor is simply lost.

Worked example

A married couple itemizes in 2026, has a contribution base of $400,000 and gives $10,000 in cash to public charities.

• Floor: 0.5 percent of $400,000 = $2,000.
• Deductible: $10,000 minus $2,000 = $8,000.
• Carryforward of the $2,000: none, since no percentage limit was exceeded.

Did the 60 percent cash limit change?

Section 70425 also rewrote section 170(b)(1)(G)(i). Cash contributions to public charities are allowed up to 60 percent of the contribution base, reduced by contributions taken into account under subparagraph (A), for taxable years beginning after December 31, 2017. The rewritten clause has no end date.

How does the top-bracket limitation affect charitable gifts?

Starting in 2026, section 68 reduces total itemized deductions by 2/37 of the lesser of the itemized deductions or the income that falls in the 37 percent bracket. For a client fully in that bracket, a $1 charitable deduction saves about 35 cents instead of 37 cents. The limitation applies after the 0.5 percent floor. See the itemized deduction limitation for top-bracket clients.

What changed for corporations?

Section 70426 rewrote section 170(b)(2)(A). A corporation's charitable contributions, other than those covered by subparagraphs (B) and (C), are allowed only to the extent they exceed 1 percent of taxable income and do not exceed 10 percent of taxable income.

The carryforward rules in section 170(d)(2) were also rewritten:

• Contributions over the 10 percent ceiling carry forward for five years, used on a first-in, first-out basis.
• Contributions disallowed by the 1 percent floor carry forward only from years in which the 10 percent ceiling is also exceeded.
• Carryforwards are reduced to the extent they would increase a net operating loss carryover.

For a C corporation client with steady giving at a low share of income, part of every year's gifts is now permanently nondeductible. Book this as a permanent difference in the tax provision. See ASC 740 income taxes for private companies.

What should clients do before December 31, 2026?

• Standard deduction clients. Make cash gifts directly to operating charities, not to a donor-advised fund, up to the $1,000 or $2,000 limit, and keep the receipts.
• Itemizers near the standard deduction. Compare itemizing every year with bunching gifts into alternate years. Bunching concentrates the floor into one year, while the non-itemizer deduction catches some cash gifts in the off years.
• Large donors. Model the floor and the section 68 limitation together, and record which contribution categories absorb the floor under the statutory order.
• C corporations. Project taxable income to see how much of planned giving falls under the 1 percent floor. Amounts lost to the floor carry forward only from a year in which the 10 percent ceiling is also exceeded, so model the carryforward before concentrating gifts in one year.

Review checklist for 2026 returns

1. Confirm whether the client itemizes after the SALT cap and the standard deduction comparison. See the SALT cap after the 2025 legislation.
2. For non-itemizers, separate cash gifts to eligible organizations from gifts to donor-advised funds, supporting organizations and noncash gifts.
3. For itemizers, compute the floor on the contribution base and apply it in the statutory order.
4. Track any floor amount added to a carryforward, by year and category.
5. For corporations, compute the 1 percent floor and 10 percent ceiling and update the carryforward schedule.
6. Check substantiation: acknowledgments for gifts of $250 or more, and Form 8283 for noncash gifts over $500, as IRS Topic 506 describes.

For other 2026 items to raise with clients, see business tax changes for 2026.

CORAA prepares ready-to-review audit files for US CPA firms; see /us.

Sources

• U.S. Government Publishing Office, Public Law 119-21, sections 70424 to 70426: https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
• IRS, One Big Beautiful Bill provisions: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
• IRS, Publication 505 (2026), Tax Withholding and Estimated Tax: https://www.irs.gov/publications/p505
• IRS, Tax Tip 2026-57, Tips for tracking charitable donations: https://www.irs.gov/newsroom/tips-for-tracking-charitable-donations
• IRS, Topic no. 506, Charitable contributions: https://www.irs.gov/taxtopics/tc506

AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error