Your Charitable Deduction Just Got Smaller. Your QCD Didn't.

Two new limits on writing off your generosity

If you itemize deductions and give a meaningful amount to charity each year, 2026 is the first tax year two new rules from the One Big Beautiful Bill Act (OBBBA) apply to your return. Neither rule takes away your ability to deduct charitable gifts — but both quietly shrink the tax benefit for higher earners who itemize.

The first is a floor equal to 0.5% of your adjusted gross income (AGI): itemized charitable contributions are only deductible to the extent they exceed that threshold. The second is a cap on the value of itemized deductions overall for taxpayers in the top 37% bracket, limiting the tax benefit to 35 cents per dollar deducted, down from 37 cents.

In short: itemizers still get a deduction — just a smaller one, and for two different reasons.

What that actually costs, in dollars

Take a taxpayer with $1 million in adjusted gross income who donates $100,000 to charity and sits in the 37% top bracket.

Under the old rules, that $100,000 gift produced a $37,000 federal tax benefit ($100,000 × 37%). Under the 2026 rules: the 0.5% AGI floor first strips $5,000 off the deductible amount ($1,000,000 × 0.5%), leaving $95,000 eligible to deduct. Then the 35-cent cap applies to that reduced amount, producing a tax benefit of roughly $33,250 — about 10% less benefit for making the exact same gift.

There's a silver lining for smaller donors who don't itemize at all: starting in 2026, non-itemizers can deduct up to $1,000 (single filers) or $2,000 (married filing jointly) in cash contributions to qualified charities — a new deduction that didn't exist before.

And for itemizers, amounts disallowed by the 0.5% AGI floor aren't simply lost: they carry forward for up to five years, the same treatment other AGI-based charitable-limit carryovers already receive.

The one giving strategy none of this touches

Here's the mechanical detail worth understanding if you're 70½ or older and charitably inclined: a Qualified Charitable Distribution (QCD) is completely unaffected by either the new 0.5% AGI floor or the new 35-cent cap, and it's not because of some special carve-out written into the new law. It's because a QCD was never an itemized deduction to begin with.

A QCD is a direct transfer of funds from your IRA straight to a qualified charity — the money never passes through your hands or shows up as taxable income on your return in the first place. Because the gift is excluded from your gross income at the source, rather than deducted after being counted as income, it simply never touches the itemized-deduction machinery that OBBBA just tightened. That holds true whether or not you itemize anything else on your return.

The 2026 numbers

The QCD annual limit is $111,000 per individual in 2026, up from $108,000 in 2025 — it's indexed for inflation each year. A separate, related limit applies to a one-time QCD used to fund a split-interest gift, such as a charitable remainder trust or charitable gift annuity: that figure rises to $55,000 in 2026, up from $54,000.

Because the QCD limit applies per IRA owner, a married couple where both spouses are 70½ or older and each holds a separate IRA can potentially direct meaningfully more between them than either could alone — though each spouse's transfers must come from that spouse's own IRA to count toward their own limit.

Who can use one, and how it interacts with your RMD

QCDs are available starting at age 70½ — an otherwise-taxable distribution paid directly from your IRA to a qualified charity, other than from an ongoing SEP or SIMPLE IRA (one still receiving employer contributions). Required Minimum Distributions (RMDs) don't kick in until age 73, which creates a window: you can start using QCDs at 70½ even before you're required to take anything out of the account.

Once RMDs do begin at 73, a QCD can satisfy some or all of that year's required distribution. A simplified example: someone with a $12,000 RMD who wants to give $10,000 to charity could withdraw the full $12,000 as taxable income and separately write a $10,000 check to the charity after tax — or direct that same $10,000 straight from the IRA as a QCD, in which case only the remaining $2,000 shows up as taxable income. One route reports more taxable income than the other, for the same net gift.

A few mechanical notes worth knowing: QCDs are reported on the standard 1099-R for the IRA distribution, and on your Form 1040 you report the full distribution amount but enter $0 as the taxable portion, noting "QCD" beside the line. QCDs also can't be used to fund a donor-advised fund — the transfer has to go to a qualified charity directly.

Where this leaves you

None of this is a recommendation about how much to give, to whom, or whether a QCD fits your particular tax situation — that depends on your age, your account types, your overall income, and your own charitable goals, and is worth working through with a tax professional who can see your full return. What's useful to understand on your own is the structural distinction: the 2026 rules changed how much itemized charitable deductions are worth, but they didn't touch — and structurally couldn't touch — a mechanism that was never an itemized deduction in the first place.

This article is educational commentary on public tax rules, not personalized investment, trading, or tax advice.