The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025 as Public Law 119-21 and also called the “Working Families Tax Cuts” by the IRS, changes the U.S. charitable contribution deduction starting with 2026.
The changes cut in opposite directions depending on whether you take the standard deduction or itemize. Non-itemizers can now deduct some cash gifts, while itemizers lose a slice of their charitable deduction. Gifts for 2026 must be made by December 31, so this affects year-end giving plans.
This article is for Japanese expats and green card holders who file Form 1040. It explains the 2026 changes, how gifts of appreciated stock and donor-advised funds (DAFs) fit in, and why Japan’s furusato nozei and gifts to Japanese organizations do not count.
Key points
- Starting in 2026, non-itemizers can deduct up to $1,000 of cash gifts ($2,000 married filing jointly) to eligible charities, on top of the standard deduction.
- The new deduction covers cash only. Noncash gifts such as stock and gifts to DAFs do not qualify.
- Itemizers can deduct only the part of their charitable contributions above 0.5% of adjusted gross income (AGI).
- If your taxable income is above the top (37%) bracket threshold, your total itemized deductions are reduced.
- Furusato nozei and gifts to Japanese organizations are gifts to foreign organizations and are generally not deductible in the U.S.
What changed for 2026
| Change | Who it affects | Rule from 2026 |
|---|---|---|
| Deduction for non-itemizers | Standard deduction filers | Deduct up to $1,000 ($2,000 joint) of cash gifts to eligible charities; DAF and noncash gifts excluded |
| 0.5% floor | Itemizers | Only charitable contributions above 0.5% of AGI are deductible |
| Itemized deduction reduction | Taxpayers above the top-bracket threshold | Total itemized deductions reduced by a 5.4% formula |
| 2026 standard deduction | Everyone | $16,100 single, $32,200 joint, $24,150 head of household |
Change 1: non-itemizers can deduct cash gifts
Beginning with 2026, individuals who do not itemize can deduct up to $1,000 ($2,000 married filing jointly) of cash contributions to eligible charitable organizations. The IRS describes it as a permanent deduction. The 2026 standard deduction is $16,100 for single filers, $32,200 for joint filers, and $24,150 for heads of household, and this deduction comes on top of it.
- What qualifies: cash contributions made during 2026. IRS Publication 6196 says organizations shown in the IRS Tax Exempt Organization Search (Pub. 78 data) with deductibility codes “50% (60% for cash contributions),” PC, POF, or FED are eligible.
- What does not: noncash gifts such as stock, and gifts to donor-advised funds.
- Records: keep receipts, canceled checks, or bank records. Every cash gift needs a bank record or written communication from the charity, and any single gift of $250 or more needs a contemporaneous written acknowledgment.
- Married filing separately: if you must itemize because your spouse itemizes, you cannot use this deduction.
If you used the standard deduction and your gifts never showed up on your return, small gifts can now count. Gifts paid by December 31 count for 2026; a check counts when mailed, and a credit card gift when charged.
Change 2: a 0.5% of AGI floor for itemizers
Starting in 2026, itemizers can deduct only the part of their charitable contributions that exceeds 0.5% of AGI. With AGI of $200,000, the first $1,000 ($200,000 × 0.5%) is not deductible.
In addition, if your taxable income is above the top-bracket threshold ($640,600 for single and head of household filers, $768,700 for joint filers, and $384,350 for married filing separately in 2026), your itemized deductions are reduced. Per IRS Publication 505, the reduction is 5.4% of the lesser of your total itemized deductions or the amount by which your taxable income exceeds the threshold. Roughly speaking, for someone in the 37% bracket, each dollar of itemized deductions saves about 35 cents (37% × (1 − 5.4%)).
Percentage-of-AGI limits still apply. The 2025 Publication 526 says your charitable deduction generally cannot exceed 60% of AGI, with 20%, 30%, or 50% limits in some cases, and excess amounts can be carried over. See our articles on standard versus itemized deductions and the SALT deduction cap.
Giving appreciated stock
If you itemize and give stock you have held for more than one year that has gone up in value (capital gain property), you can generally deduct its fair market value. Because you give the shares rather than sell them, you do not lock in the gain yourself. Keep these points in mind:
- 30% of AGI limit: capital gain property given to 50% limit organizations is generally subject to the 30% limit.
- Not eligible for the new deduction: stock is a noncash gift, so it does not count toward the $1,000/$2,000 non-itemizer deduction.
- Form 8283: required if your deduction for noncash gifts is more than $500. Publicly traded securities go in Section A in any amount, so no qualified appraisal is needed even above $5,000.
- Year-end timing: a stock gift counts when the shares are delivered or transferred to the charity or its agent. Brokerage transfers can take days, so start early in December.
For shares that have lost value, selling to realize the loss and then giving cash may work better. See our capital gains guide.
Using a donor-advised fund
With a DAF, you contribute cash or stock to a sponsoring organization and later recommend grants to charities. If you itemize, you deduct the contribution in the year you make it. You cannot deduct it if you lack a contemporaneous written acknowledgment from the sponsor that it has exclusive legal control over the assets, or if the sponsor is a war veterans’ organization, a fraternal society, or a nonprofit cemetery company.
With the 2026 changes, DAFs are a natural tool for “bunching”: putting several years of giving into one year, itemizing that year, and taking the standard deduction in the others. Because DAF gifts do not qualify for the non-itemizer deduction, in standard-deduction years it is better to give cash directly to charities if you want that deduction.
Example: a married couple filing jointly with AGI of $250,000, $20,000 a year of other itemized deductions (state taxes, mortgage interest, and so on), and $10,000 a year of giving.
- Giving every year: itemized deductions would be $20,000 + ($10,000 − $1,250) = $28,750, below the $32,200 standard deduction. They take $32,200 plus the $2,000 cash-gift deduction, or $34,200 a year: $102,600 over three years.
- Putting three years ($30,000) into a DAF in 2026: 2026 itemized deductions are $20,000 + ($30,000 − $1,250) = $48,750. In 2027 and 2028 they give nothing directly and take $32,200 each year, for a three-year total of $48,750 + $32,200 + $32,200 = $113,150.
- The difference is $113,150 − $102,600 = $10,550 (assuming the same AGI and standard deduction each year).
Age 70½ or older: consider a QCD
If you are 70½ or older and have a traditional IRA, a qualified charitable distribution (QCD) paid directly from the IRA to a qualified charity is another option. The 2026 limit is $111,000, and a QCD can count toward your required minimum distribution. A QCD is excluded from income rather than deducted, so it works even if you do not itemize, and the 0.5% floor does not affect it.
Furusato nozei and Japanese charities are not deductible
The U.S. deduction covers gifts to qualified U.S. organizations. The Schedule A instructions say gifts to foreign organizations are not deductible, except for certain Canadian, Israeli, and Mexican charities; gifts to certain U.S. organizations that transfer funds to foreign charities may be deductible. Furusato nozei payments to Japanese municipalities and gifts to Japanese organizations are therefore generally not deductible in the U.S.
Also, if you receive something in return, you can deduct only the amount above its value. In the Schedule A instructions’ example, a $70 gift that includes a $40 dinner yields a $30 deduction. Our furusato nozei article covers it in detail.
Worked examples
Example 1: A married couple filing jointly who take the standard deduction give $1,500 in cash to eligible U.S. charities in 2026. They deduct $1,500 on top of the $32,200 standard deduction. At an assumed 22% federal marginal rate, that saves $1,500 × 22% = $330. If they gave $3,000, the deduction would be capped at $2,000, saving $2,000 × 22% = $440.
Example 2: A single itemizer with AGI of $300,000 gives $10,000 in cash. The 0.5% floor is $300,000 × 0.5% = $1,500, so the deductible amount is $10,000 − $1,500 = $8,500.
Example 3: Shares bought five years ago for $4,000 are now worth $10,000. Giving the shares lets an itemizer generally count $10,000 toward the charitable deduction (subject to the 30% of AGI limit and the 0.5% floor) without locking in the $6,000 gain. Selling first and giving cash would produce a $6,000 gain; at an assumed 15% long-term rate, that is $6,000 × 15% = $900 of tax.
FAQ
I take the standard deduction. If I give $500 in 2026, can I deduct it?
Yes, if it is cash to an eligible charity. It is deducted on top of the standard deduction, up to $1,000 ($2,000 joint). Keep the receipt or bank record.
Do gifts to a DAF count toward the new $1,000/$2,000 deduction?
No. To deduct a DAF contribution you must itemize, and you need the sponsor’s written acknowledgment.
Does a stock gift count toward the new deduction?
No. The new deduction is for cash only. Stock gifts are deductible, generally at fair market value, only if you itemize.
How large is the 0.5% floor?
It is AGI × 0.5%. With AGI of $200,000, the first $1,000 is not deductible; with $300,000, the first $1,500.
Is furusato nozei deductible in the U.S.?
Generally no. Gifts to foreign organizations are not deductible, except for certain Canadian, Israeli, and Mexican charities.
At CLT NY INC., an IRS Enrolled Agent helps Japanese expats and green card holders plan year-end giving and file their returns, in Japanese or English. Contact us.
Related articles
- Is ‘Furusato Nozei’ Deductible in the US? A Comprehensive Guide to its US Tax Treatment
- Standard Deduction vs. Itemized Deductions: Which is Better and How to Choose for U.S. Tax Filers
- How U.S. Property Tax Works and the SALT Deduction Cap: What the OBBBA Increase to $40,000 Means for Homeowners
- Automate Donation Receipt Extraction from Gmail using GAS for Schedule A Deduction List Creation
- US Stock and Cryptocurrency Tax Filing: A Comprehensive Guide to Capital Gains and Loss Carryforwards
- The OBBBA (2025 Tax Law) Explained: What Changed for Japanese Residents of the U.S. (Standard Deduction, SALT, Tips and Overtime, CTC, Trump Accounts)
Sources: IRS, Working Families Tax Cuts; IRS, Working Families Tax Cuts: Tax deductions for working Americans and seniors; IRS Publication 6196 (10-2026); IRS Publication 505 (2026); IRS Topic No. 506; IRS Publication 526 (2025); IRS Instructions for Schedule A; IRS Instructions for Form 8283; IRS, Tax inflation adjustments for tax year 2026 (IR-2025-103); IRS, Retirement plans FAQs regarding IRAs distributions; IRS Notice 2025-67. Information as of October 2026. This article provides general information and is not individual tax advice.
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