If you write a check to your church every month, part of that giving is no longer deductible. Not reduced. Not phased down. Gone, with no carryforward to a future year.
That is a strange thing to read if you have given the same way for twenty years. But 2026 is the first year the One Big Beautiful Bill Act’s charitable rules actually apply, and they changed the arithmetic for nearly everyone who itemizes.
Here is the change. Under new Internal Revenue Code section 170(b)(1)(I), a taxpayer who itemizes may deduct charitable contributions only to the extent they exceed one half of one percent of income. Everything below that line is permanently disallowed.
A taxpayer with $100,000 of income gives $1,200 in cash. The floor is $500. She deducts $700. The other $500 is never deducted, in any year, because nothing else in the code created a carryover to hold it.
You have about fifteen weeks to adjust. That is the point of this article.
One precision note: the statute measures the floor against your “contribution base,” which is adjusted gross income figured without a net operating loss carryback. A wealth planning & management attorney can help individual donors understand how these figures apply to their charitable planning. For nearly every individual donor, those are the same number.
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Two Cuts, Applied in Order
High earners absorb a second reduction on top of the floor. The Act replaced the old Pease limitation with a new section 68, which cuts itemized deductions by two thirty-sevenths of the smaller of two amounts: your total itemized deductions, or your taxable income above the 37 percent bracket threshold, figured before this rule applies and with your itemized deductions added back in.
For 2026 those thresholds are $640,600 for single filers and $768,700 for married couples filing jointly.
Translated: a top-bracket donor now nets about 35 cents of benefit per charitable dollar instead of 37.
Order matters, and there are three steps rather than two. The percentage-of-income ceilings that have always existed run first. Then the new half-percent floor. Then the section 68 reduction, on whatever survives.
The floor has an ordering rule of its own, and it is the opposite of what a donor would choose. It is applied across your contribution categories in a fixed sequence, and cash gifts to public charities are reduced last. That sounds like a technicality until you see what it means in practice. The floor generally eats the money you gave your church rather than the appreciated stock you gave the university.
The Virginia Wrinkle Almost Nobody Is Discussing
Virginia now conforms to the Internal Revenue Code as of a fixed date, December 31, 2025, and it picks up federal changes that affect how itemized deductions are computed. So the new half-percent floor flows straight onto your Virginia return.
But the Virginia Department of Taxation’s 2026 Legislative Summary, published July 6, says it plainly on page 8. Virginia does not conform to the federal replacement of the Pease limitation and continues to apply the Pease limitation on itemized deductions. Tax Bulletin 26-1 says the same thing.
Read that carefully. For 2026, a high-income Virginian faces the new federal two thirty-sevenths reduction on the federal return and the old Pease phase-down on the Virginia return. Two different limitation regimes running on one set of numbers.
There is a further twist. Virginia generally does not cap the deduction for state and local taxes, but taxpayers subject to Virginia’s Pease limitation must apply the federal SALT cap, including the higher temporary cap, when calculating it on the Virginia return.
None of this surfaces in a standard software walkthrough. It is the kind of divergence that turns a good federal giving strategy into a mediocre combined one.
What Bunching Actually Saves
Elena is a Norfolk physician. She and her husband file jointly with about $800,000 of income. Each year they give $12,000 to their church and $8,000 to a Chesapeake Bay conservation group, and they have itemized for years because of state taxes and mortgage interest.
Her 2026 floor is $4,000. So $4,000 of her $20,000 produces no deduction at all. Next year it happens again. Over two years, $8,000 of real giving earns no tax recognition.
Now suppose she bunches. In 2026 she funds a donor-advised fund with $40,000, two years of giving at once, and gives nothing in 2027. She absorbs the floor once instead of twice and deducts $36,000 instead of $32,000. Her charities get the same money on the same schedule, because the fund makes the grants over time.
She simply stopped paying the toll twice.
That is a $4,000 swing on a $40,000 gift, and it scales. For clients giving six figures a year, alternating years is no longer an optimization. It is the default posture.
Should I Just Use a Qualified Charitable Distribution Instead?
If you are 70 and a half or older, often yes. It is the cleanest tool available.
A qualified charitable distribution moves money directly from your IRA to a charity. It does something no other strategy does. It skips the half-percent floor entirely, and because the money never enters your income, it lowers the floor that applies to everything else you give. It can also satisfy part of your required minimum distribution. The 2026 limit is $108,000 per person.
Two other exceptions are worth knowing. Taxpayers who do not itemize now get a separate above-the-line deduction of up to $1,000 for single filers and $2,000 for joint filers, and the floor does not touch it. That one is cash only, excludes donor-advised funds, and does not carry forward. Separately, the floor does not apply to trusts and estates claiming a charitable deduction under section 642(c), so in some households the more tax-efficient donor is now the trust rather than the person.
Business owners have a parallel problem. Corporate charitable contributions now face a floor of one percent of taxable income on top of the existing ten percent ceiling, which means modest corporate giving can disappear entirely.
One thing we would rather flag than paper over. Nobody knows yet whether charitable carryovers created before 2026 are subject to the new floor when you use them. The statute has no grandfather clause, the IRS has issued no guidance, and national firms have published opposite conclusions this year. If you carry a large carryover into 2026, that uncertainty belongs in a planning conversation with a proactive tax plan attorney this fall.
What to Do Before December 31
- Calculate your floor. One half of one percent of projected 2026 income. Compare it to what you actually plan to give.
- Decide now whether 2026 is a bunching year or a fallow one, and open the donor-advised fund before December rather than during the last week of it.
- If you are over 70 and a half, route your regular giving through a qualified charitable distribution instead of a checkbook.
- Ask whether cash or appreciated securities should carry the gift, given that the floor consumes cash last.
- Have someone run your Virginia return alongside the federal one, specifically to see the Pease effect.
Why This Sits Between Three Advisors
The floor is a tax rule. The fix is a cash-flow decision, because bunching changes what you give and when, and the funding source changes which assets you sell. Whether the trust or the individual should be the donor is a drafting question.
When those three conversations happen in three offices months apart, the usual result is someone who gave generously and got less credit for it than she had coming.
If you give more than a few thousand dollars a year and you have not looked at 2026 yet, September is the month to do it. Let’s talk. Schedule a consultation and we will run your floor, your Virginia exposure, and your giving vehicle in one sitting.