The new bill which passed into law on July 4, 2025 (“one big beautiful bill”) adds a new useful tax deduction:
- Those who claim the standard deduction generally can not deduct charitable donations and other deductions from their taxable income. However, beginning in 2026 they will be able to deduct charitable donations of up to $1,000/single or $2,000/couple from their taxable income.
- This deduction is only for donations via cash, credit card, check, and the like. Donations of stock/mutual-funds/ETFs, or property (e.g. old clothing to Goodwill) is not eligible for this special deduction.
- (A few finer points: 1) Donations to a Donor Advised Fund are not eligible for this special deduction. 2) This deduction does not lower your AGI. 3) This deduction does not affect state taxes in any way. 4) This deduction is not relevant and does not help those who itemize their deductions.)
Just to put a dollar figure on this benefit:
- Suppose a couple who takes the standard deduction has $2,000 in charity donations that they make each year. And let’s suppose they are in the 22% tax bracket. The new law will reduce their taxes by $440 each year (2,000 x .22 = 440).
We had a similar (smaller) deduction temporarily added during COVID, and this has now been passed into law as a permanent deduction from calendar year 2026 and onward. We’ll repost this in 2026. Keep this in mind when you’re doing your taxes (in early 2027 and onward) to check for charity donations and receipts. I keep a ‘Charity’ folder in my gmail to track my donations and refer there at tax time.
On a related note, it’s worth flagging that the same bill adds a negative provision for those who itemize their deductions:
- Charity donations only get deducted in amounts exceeding .5% of your AGI. For example, a person or couple who has an AGI of $100,000 who donates $5,000 to charity will only get a $4,500 deduction since the first .5% ($500) doesn’t get deducted. This change also goes into effect starting in calendar year 2026.
- (There’s a similar provision of 1% for charity donations by corporations. I believe this only affects C-Corporations, and not pass-through entities like LLC’s or S-Corporations.)
I suppose the new .5% exclusion is meant to cover the cost of allowing standard filers to get the $2,000. Or something like that.
In any case, most tax filers take the standard deduction and can potentially gain from the new charity deduction. Personally, I’ve been itemizing lately, and I’ll get hit with the .5% exclusion.
