New Floors and Limitations

The OBBB introduced new rules for charitable deductions under IRC § 170, effective for tax years beginning in 2026. These changes impact both individuals and corporations.

• Individual itemizers: The OBBB established a new floor of 0.5% of adjusted gross income (AGI) – only aggregate charitable contributions exceeding this amount are deductible. Additionally, for individuals in the top tax bracket, the value of the deduction is capped, reducing the tax benefit from 37% to 35%.
• C corporations: A similar new floor applies – donations are only deductible to the extent they exceed 1% of the company’s taxable income. The existing 10% of taxable income ceiling remains in place.
• Individual non-itemizers: A permanent deduction is now available for cash contributions, capped at $1,000 for single filers and $2,000 for joint filers.

To dig deeper, visit the original article on the Thomson Reuters blog.