The One Big Beautiful Bill (“OBBB”), signed into law in July 2025, made several significant changes to the tax code that will take effect beginning with the 2026 tax year. One of the most notable changes for everyday investors is a brand-new charitable deduction specifically designed for taxpayers who take the standard deduction.
You may already be familiar with qualified charitable distributions (QCDs) from an IRA, or how contributions of cash or property can be deducted if you itemize. However, this new charitable deduction for non-itemizers operates differently from both of those strategies. Here is what you need to know about the rule change and how it might impact your giving strategy.
The Shift Away from Itemizing
Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, many taxpayers were able to claim charitable contributions as an itemized deduction because the standard deduction was significantly lower than it is today.
When the TCJA substantially increased the standard deduction, the number of taxpayers who itemized dropped dramatically. As a result, the vast majority of charitable gifts made by taxpayers claiming the standard deduction currently provide no direct tax benefit to the donor.
Congress briefly addressed this issue during the COVID-19 pandemic by allowing non-itemizers to claim a limited deduction for cash contributions to qualifying charities in 2020 and 2021. That provision expired after 2021. Now, the OBBB is bringing a similar deduction back for non-itemizers beginning in 2026—but with a few different rules.
How the New Above-the-Line Deduction Works
Starting in 2026, taxpayers who claim the standard deduction may deduct up to $1,000 of qualifying charitable contributions if filing as a single taxpayer, or up to $2,000 if filing a joint return.
This deduction is claimed “above the line,” meaning it directly reduces your gross income to arrive at your Adjusted Gross Income (AGI), rather than being taken as an itemized deduction on Schedule A.
Because this deduction reduces your AGI, it may also provide secondary tax benefits in situations where income-based limitations or phaseouts apply, such as IRA contribution limits or the taxation of Social Security benefits.
Important Limitations to Keep in Mind
While this is a welcome change for many households, the new deduction comes with some notable limitations under the OBBB:
- Cash Only: Only cash contributions qualify for this specific deduction. Contributions of appreciated securities, household goods, vehicles, real estate, or other property do not qualify.
- Eligible Charities: The contribution must be made to a public charity that is eligible to receive tax-deductible contributions. Gifts made to donor-advised funds (DAFs), supporting organizations, and certain private foundations do not qualify for this non-itemizer deduction.
- Substantiation Rules Apply: Taxpayers must remember that normal IRS substantiation rules continue to apply. A cancelled check, bank statement, credit card statement, or written acknowledgment from the charity may be required depending on the amount and type of contribution. Good recordkeeping remains essential.
A Welcome Opportunity for Generosity
While the maximum deduction amount of $1,000 or $2,000 may seem modest, this provision creates a meaningful opportunity for taxpayers who regularly support charitable organizations but do not itemize their deductions.
If you expect to claim the standard deduction in 2026, you should consider reviewing your charitable giving plans. Individuals who have historically received no tax benefit from their donations may now be able to obtain at least a modest deduction for their generosity.
Although tax savings should rarely be the primary reason for making charitable gifts, this new above-the-line deduction is a welcome change that recognizes and encourages charitable giving by all taxpayers, not just those who itemize. If you have questions about how the One Big Beautiful Bill will impact your overall financial picture, reach out to our advisory team today..
