The "Charitable Act" modifies and extends 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, while also eliminating a related penalty.
James Lankford
Senator
OK
The "Charitable Act" modifies and extends the deduction for charitable contributions for individuals who do not itemize deductions. For the 2026 and 2027 tax years, the deduction is capped at one-third of the standard deduction for the individual. The bill also eliminates a penalty related to this deduction. These changes are effective for taxable years beginning after December 31, 2025.
Charitable Act Caps Non-Itemized Donations Deduction at One-Third of Standard Deduction Starting 2026
The "Charitable Act" changes how much people who don't itemize their taxes can deduct for charitable donations. Starting in 2026, this bill caps the deduction for these taxpayers at one-third of the standard deduction amount. It also removes a penalty related to this specific deduction.
Breaking Down the Deduction Cap
This bill directly impacts taxpayers who take the standard deduction, rather than itemizing. Instead of potentially deducting a larger amount, you're limited to one-third of the standard deduction if you donate to charity and don't itemize. For example, if the standard deduction for a single filer in 2026 is $15,000, the maximum charitable contribution deduction under this bill would be $5,000 (one-third of $15,000). The bill specifically states this change applies to tax years 2026 and 2027 (SEC. 2).
Penalty Removal - A Simplification
The bill also cleans up some tax code language. It removes a penalty previously associated with this non-itemized charitable deduction. Specifically, it gets rid of paragraph (9) in Section 6662(b) of the Internal Revenue Code, and strikes out subsection (l) of Section 6662, which dealt with increased penalties. This might not change your tax bill directly, but it simplifies the rules (SEC. 2).
Real-World Impact: Capped Giving?
For folks who regularly donate to charity and don't itemize, this change could mean a smaller tax break. Let's say a teacher takes the standard deduction and donates $7,000 a year to educational charities. Under current rules, they might get a larger deduction. But with this bill, their deduction is capped. This could make people rethink how much they donate, since the tax benefit is now limited. The flip side is that it does provide some deduction for non-itemizers, potentially encouraging those who give smaller amounts.
The Bottom Line
This bill aims to modify and extend the deduction for charitable contributions, but with a significant limitation. It's a trade-off: a guaranteed deduction for non-itemizers, but a smaller one than might be possible otherwise. The removal of the penalty simplifies things, but the cap is the key change to watch.