With the passage of President Trump’s “One Big Beautiful Bill,” significant changes to the tax code will take effect in 2026—many of which will reduce the tax efficiency of charitable contributions.
2026 Federal Tax Law Changes
December 10, 2025
2026 Federal Tax Law Changes
With the passage of President Trump’s “One Big Beautiful Bill,” significant changes to the tax code will take effect in 2026—many of which will reduce the tax efficiency of charitable contributions.
We want to ensure you are aware of the following changes so you may best navigate charitable giving strategies that align with both your philanthropic goals and financial plans.
Key Planning Considerations
- Higher Deduction Rate in 2025: Charitable gifts are currently deductible at the top rate of 37%. In 2026, that rate drops to 35%, reducing the value of deductions for high-income donors. This means that a $10,000 gift will only reduce taxes by $3,500 instead of $3,700.
- New AGI Thresholds: Beginning next year, only contributions exceeding 0.5% of a donor’s adjusted gross income (AGI) will be deductible—impacting the effectiveness of annual giving. For example, if a client’s AGI is $400,000, the first $2,000 of their charitable giving won’t be deductible. This change makes smaller annual gifts less tax-efficient unless they exceed the new threshold.
Kathryn Wittneben
Director of Philanthropy
- Frontloading Multi-Year Gifts: Many donors are choosing to “bunch” or accelerate multi-year commitments into 2025 to preserve full deductibility. This is especially relevant for donor-advised funds and endowment gifts. For example, instead of giving $100,000 annually for five years, your clients might consider giving $500,000 now to lock in full tax benefits.
- Gifts of Appreciated Securities: Donating stocks or other appreciated assets allows clients to avoid capital gains tax while receiving a full charitable deduction—an ideal strategy in a strong market year.
- Qualified Charitable Distributions (QCDs): Clients aged 73+ can use Required Minimum Distributions (RMDs) from IRAs to make tax-free charitable gifts, reducing taxable income while supporting causes they care about. This strategy offers a dollar-for-dollar reduction in taxable income.
- Endow Iowa Tax Credits: Beginning in 2026, the maximum tax credit per taxpayer will be reduced from $100,000 to $50,000. This means that a donor will receive a maximum tax credit of $50,000 for a gift of $200,000 to an endowed fund at an Iowa community foundation rather than the current maximum tax credit of $100,000 for a gift of $400,000. Gifts to corporate-named endowments will no longer be eligible. The overall Endow Iowa tax credit allocation available to Iowa taxpayers will decrease in 2026 from $6 million to $3.5 million. Please note there is still $1.8 million available in tax credits this year.
Partnering for Impact
The Community Foundation of Johnson County is here to support you or your clients with customized giving solutions, including donor-advised funds, legacy planning, and complex asset gifts. We welcome the opportunity to collaborate with you to ensure your charitable goals are met with maximum impact and efficiency.
Please feel free to reach out if you’d like to discuss specific strategies or explore partnership opportunities!