A Quick Guide for CWRU Donors

The One Big Beautiful Bill Act (OBBBA) is sweeping federal tax legislation that includes changes to how charitable contributions and deductions are treated, while leaving many core incentives like qualified charitable distributions from IRAs unchanged.  These provisions take effect for tax years beginning after December 31, 2025.  Below is a summary of key updates for non-itemizers and itemizers. 

Key Changes Starting in 2026

1. For Non-itemizers – An “Above -the- Line” $1,000/$2,000 Deduction
   
   Non-itemizers are those who take the standard deduction (i.e., the set amount anyone can subtract from income -no receipts or itemizing needed. For example, $31,500 is the 2025 standard deduction for married couples).    
   
   In 2026, non-itemizers will be able to claim a deduction for certain cash gifts to charity without itemizing.  
   1. Details: Up to $1,000 for single filers or $2,000 for married filing jointly.
   2. Background: This is like the temporary $300/single, $600/married filing jointly deduction that was available during the COVID-19 pandemic
   3. Limitations: Applies only to cash gifts to public charities; does not apply to donations to donor-advised funds or private non-operating foundations.
       
2. For Itemizers:  Reduced Tax Benefit to Schedule A Deductions  
   
   Itemizers use Schedule A to deduct allowable expenses like mortgage interest, state and local taxes, medical costs, and charitable gifts when these exceed the standard deduction. The OBBBA decreases the tax value of itemized deductions for those in the 37% federal income tax bracket and adds a new rule specific to charitable gifts that applies to all itemizers:  the .05% floor.
    
   1. High-Income Itemizers: Reduced Tax Savings for Deductions
      
      For those in the 37% federal tax bracket (taxable income exceeding $751,601 if married filing jointly or $626,351 if single), the tax savings from itemized deductions (including charitable gifts) will decrease.
      1. The change: If you are in the 37% federal tax bracket, you currently save 37 cents in tax for every dollar of itemized deductions.  Starting in 2026, you will only save 35 cents per dollar.
      2. Compare 2025 v. 2026: 
         If an individual in the 37% federal tax bracket itemizes $100,000 in deductible Schedule A expenses (which may include charitable gifts, mortgage interest, property taxes, etc.)  in 2025, they will be able to reduce their federal income tax by $37,000. 
         
         If this same individual waits until 2026 to make the same deductible expenditures, they will be able to reduce their federal income tax by only $35,000 - a loss of $2,000 in tax savings.
          
   2. All Itemizers Beware: New 0.5% AGI Floor for Charitable Deductions.
      
      Individuals who itemize only earn a charitable deduction for contributions that exceed 0.5% of their AGI (Adjusted Gross Income – your total income minus certain allowed deductions; it forms the basis for how your federal income taxes are calculated).
      1. Details: Only the portion of charitable gifts exceeding 0.5% of AGI qualifies for immediate deduction; the amount below the floor cannot be deducted in the current year but can be carried forward for 5 years.
      2. Example: In 2026, if you have $500,000 AGI and donate $100,000 to charity, the first $2,500 of your donation (0.5% x $500,000) is not immediately deductible, meaning your charitable deduction is limited to $97,500.  At a 35% tax rate, you would lose $875 in potential tax savings – an amount that could otherwise support more charitable work.

Need Guidance or Have Questions? We’re Here to Help

Beginning in 2026, these new tax rules will make it harder for itemizers to fully deduct charitable gifts   Consider working with your tax advisor and our team to confidentially discuss the timing of your gifts so that you may maximize the impact of your generosity.
Our Office of Strategic Giving is available to support you every step of the way. Contact us at 216.368.4460 or by email at strategicgiving@case.edu.