The Charitable Act modifies the tax deduction for charitable contributions for non-itemizers, capping it at one-third of the standard deduction for the 2026 and 2027 tax years, and updates related penalty clauses in the Internal Revenue Code.
Blake Moore
Representative
UT-1
The "Charitable Act" modifies the tax deduction for charitable contributions for individuals who do not itemize deductions. For the 2026 and 2027 tax years, the deduction will be capped at one-third of the standard deduction amount for the individual. The Act also eliminates and redesignates certain penalty clauses in the Internal Revenue Code related to these deductions, updating references accordingly.
New 'Charitable Act' Caps Non-Itemized Charitable Deductions at One-Third of Standard Deduction Starting 2026
The "Charitable Act," is a straightforward tweak to tax rules for folks who donate to charity but don't itemize their deductions. Basically, if you're not itemizing, this bill changes how much of your charitable giving you can deduct from your taxes, starting in 2026.
Breaking Down the Deduction
This bill, effective after December 31, 2025, puts a new limit on charitable deductions for those who take the standard deduction. Come 2026 and 2027, you'll only be able to deduct up to one-third of your standard deduction amount for charitable contributions. For example, if the standard deduction is $13,850, the maximum charitable deduction would be roughly $4,617. This applies directly to individuals who opt not to itemize, which is a significant chunk of taxpayers. The Act also cleans up some old penalty rules in the tax code, making things a bit simpler (SEC. 2).
Real-World Rollout
So, how might this play out? Imagine a freelance graphic designer who doesn't have enough deductions to itemize. They regularly donate to a local animal shelter. Under this new rule, their ability to deduct those donations gets capped. While it encourages giving, it also limits the tax benefit. This could be a bit of a bummer for those used to deducting more, but it streamlines things for the IRS.
Potential Pitfalls
One challenge? The cap might unintentionally make people think twice about how much they donate, especially if they were used to deducting a larger portion of their contributions. It's a balancing act – encouraging generosity while keeping the tax system manageable. There might be a slight risk that some charities could try to pressure people for donations, knowing their donors can get a deduction, even if capped, but that's more of an issue for the charities than the taxpayer.
This change fits into the existing tax framework by modifying rules for non-itemizers. It doesn’t overhaul the whole system, but it does introduce a notable change for a specific group of taxpayers. It is a modification of existing laws.