Starting with 2026 returns, the charitable deduction floor means an itemizer can deduct gifts to charity only to the extent they exceed 0.5% of the taxpayer's contribution base, which for most people is their adjusted gross income (AGI). A client with $400,000 of AGI loses the first $2,000 of giving, and the IRS draft of the 2026 Schedule A (draft, as of October 2026) now runs that calculation through a worksheet before the number reaches the form.
The charitable deduction floor is the biggest reason Schedule A (Form 1040) grows from one page to two for 2026. The draft also carries a higher state and local tax (SALT) cap with its own phasedown, a returning line for mortgage insurance premiums, and a new screen for high earners whose itemized deductions are cut by 2/37. This guide walks through each change, shows the arithmetic on two sample returns, and explains what preparers should check before filing season. Figures and line numbers are as of October 2026 and come from IRS drafts, which can still change before the final forms are released.
The final 2025 Schedule A fits on one page and ends at line 18, the election to itemize. The draft 2026 Schedule A, marked "Created 5/12/26" and "DRAFT, DO NOT FILE", spreads the same sections across two pages. Page 1 now stops after line 10 (interest you paid), and page 2 starts with gifts to charity and runs to line 19.
| Item | Final 2025 Schedule A | 2026 Schedule A (draft, as of October 2026) |
|---|---|---|
| Pages | 1 | 2 |
| SALT line 5e cap | $40,000 ($20,000 MFS), phasedown above $500,000 | $40,400 ($20,200 MFS), phasedown above $505,000 ($252,500 MFS) |
| Line 8d | Reserved for future use | Mortgage insurance premiums |
| Charitable gifts | Lines 11 to 14, added directly | Line 13 pulls from a Charitable Contribution Limitation Worksheet |
| Other itemized deductions | One line 16 | Lines 17a to 17k, totaled on 17z |
| Total itemized deductions | Line 17 | Line 18, with a $384,350 screen that sends some filers to an Itemized Deductions Worksheet |
Two of those rows are new rules from the One Big Beautiful Bill Act (Pub. L. 119-21): the charitable deduction floor and the 2/37 limitation. The SALT row reflects the scheduled 2026 step in a cap that the same law raised for 2025. The other itemized deductions block was split into separate lines. That is a layout change. The list of deductible items is the same. For a refresher on how the whole schedule feeds Form 1040, see our guide to Form 1040 with itemized deductions.
The rule sits in 26 U.S.C. 170(b)(1)(I). A charitable contribution that would otherwise be deductible "shall be allowed only to the extent that the aggregate of such contributions exceeds 0.5 percent of the taxpayer's contribution base for the taxable year." The amendment applies to taxable years beginning after December 31, 2025, so calendar year 2026 is the first return it touches.
A few mechanics matter in practice:
On the draft Schedule A (draft, as of October 2026), lines 11 and 12 still collect cash and noncash gifts. Line 13 then says "Enter the amount from line 6 of the Charitable Contribution Limitation Worksheet," which is where the floor and the AGI ceilings are applied. Carryovers from prior years go on line 14. As of October 2026, the IRS has not posted a 2026 draft of the Schedule A instructions, so the worksheet itself has not been published yet. Software vendors will build it from the statute and the final instructions.
The charitable deduction floor applies only to people who itemize. Under section 170(p), a taxpayer who takes the standard deduction can deduct cash gifts up to $1,000, or $2,000 on a joint return. The statute computes that amount "without regard to subsections (b)(1)(G)(ii), (b)(1)(I), and (d)(1)," so the 0.5% floor does not reduce it. Gifts to supporting organizations and to donor advised funds do not qualify for this deduction.
The draft 2026 Form 1040 gives it its own line (draft, as of October 2026): line 12f, "Charitable contribution deduction for non-itemizers," right below line 12e for the standard deduction or Schedule A total. Our article on the charitable deduction for non-itemizers covers who qualifies and how to document the gifts.
This split creates a planning question for clients near the standard deduction line. A married couple with modest giving may get more from the standard deduction plus line 12f than from itemizing with the floor applied. Clients who give through a donor advised fund need a different analysis, because those gifts never qualify for line 12f and remain subject to the floor when itemized.
Line 5e of the draft Schedule A (draft, as of October 2026) reads: "Enter the smaller of line 5d or $40,400 ($20,200 if married filing separately)." Filers with Form 1040, line 11b above $505,000 ($252,500 if married filing separately) are sent to the instructions for the phasedown.
The rule comes from 26 U.S.C. 164(b)(7). For 2026, the applicable limitation amount is $40,400. It is reduced by 30% of the excess of modified adjusted gross income over a $505,000 threshold, but the reduction "shall not result in the applicable limitation amount being less than $10,000." Both the cap and the threshold rise by 1% a year through 2029, and the cap returns to $10,000 for taxable years beginning after 2029.
Two quick reference points:
A higher cap pulls more households back into itemizing, and that is exactly when the charitable deduction floor starts to bite on giving they used to deduct in full. Business owners in the phasedown range should also look at their state's elective pass-through entity tax, covered in our piece on how the pass-through entity tax turns state tax into a federal deduction.
The revised section 68, titled "Overall limitation on itemized deductions," applies to taxable years beginning after December 31, 2025. It reduces itemized deductions by 2/37 of the lesser of two amounts:
Under Rev. Proc. 2025-32, the 37% bracket for 2026 starts above $768,700 for married couples filing jointly, $640,600 for single filers and heads of household, and $384,350 for married individuals filing separately. Section 68(b) applies the reduction "after the application of any other limitation," so the SALT cap and the charitable deduction floor come off first.
The economic effect is that each dollar of itemized deductions saves about 35 cents for a taxpayer fully in the 37% bracket, since 37% times (1 minus 2/37) equals 35%.
Line 18 of the draft Schedule A (draft, as of October 2026) asks whether Form 1040, line 11b, minus lines 13a and 13b, is more than $384,350. That figure matches the lowest 37% bracket threshold (married filing separately), so it works as a screen. A "Yes" sends the filer to the Itemized Deductions Worksheet, and many filers who answer "Yes" will find on the worksheet that no reduction applies.
Both examples assume married filing jointly, all gifts in cash to public charities, MAGI equal to AGI, and no QBI or Schedule 1-A deductions. The 2026 standard deduction for joint filers is $32,200.
| Step | Couple A | Couple B |
|---|---|---|
| AGI (line 11b) | $560,000 | $1,000,000 |
| State and local taxes paid | $35,000 | $60,000 |
| SALT cap after phasedown | $23,900 | $10,000 |
| SALT deduction (line 5e) | $23,900 | $10,000 |
| Mortgage interest | $18,000 | $30,000 |
| Cash gifts to charity | $15,000 | $50,000 |
| Charitable deduction floor (0.5% of AGI) | $2,800 | $5,000 |
| Charitable deduction after floor | $12,200 | $45,000 |
| Itemized deductions before section 68 | $54,100 | $85,000 |
| Line 18 screen, draft as of October 2026 (over $384,350?) | Yes | Yes |
| Taxable income before section 68 plus itemized deductions | $560,000 | $1,000,000 |
| Excess over $768,700 | $0 | $231,300 |
| Section 68 reduction (2/37 of the lesser amount) | $0 | $4,594.59 |
| Itemized deductions allowed | $54,100 | $80,405.41 |
Couple A answers "Yes" on line 18 but owes no reduction, because their income never reaches the 37% bracket. Their 2026 itemized total still clears the $32,200 standard deduction by a wide margin, mostly because of the larger SALT cap.
Couple B hits every new limit. The SALT phasedown takes the cap to its $10,000 floor, the charitable deduction floor removes $5,000 of giving, and section 68 then trims 2/37 of the $85,000 total because that amount is smaller than the $231,300 of excess income. At a 37% rate, $85,000 of deductions would have saved $31,450. The $80,405.41 allowed saves $29,750, which equals $85,000 at 35%.
On the 2025 form, line 8d reads "Reserved for future use." On the 2026 form (draft, as of October 2026) it reads "Mortgage insurance premiums (see instructions)" and feeds the line 8e subtotal. Clients who pay private mortgage insurance should have their Form 1098 checked for premium amounts again. Eligibility rules and income limits are covered in our article on the mortgage insurance premium deduction.
Because the floor is a fixed slice of AGI each year, the timing of gifts matters more than before. Bunching two or three years of giving into one year means the floor applies once to the bunched amount. A donor advised fund is the usual way to bunch while still spreading grants to charities over time.
IRA owners aged 70½ or older can make a qualified charitable distribution directly from the IRA. Under section 408(d)(8), the distribution is excluded from gross income within the annual dollar limit. It never appears on Schedule A, so the floor does not reach it. For retirees, this fits into broader retirement tax planning around required distributions.
For clients near the standard deduction line, run the return both ways. The answer can flip from one year to the next as the SALT phasedown and the floor interact with the new line 12f deduction. Our summary of Big Beautiful Bill changes for small businesses covers the business side of the same law.
Firms that split preparation and review should add these items to their review checklist. Our overview of the 1040, 1065 and 1120 tax prep workflow shows where a second review fits.
What is the charitable deduction floor for 2026? Starting with 2026, itemizers can deduct charitable contributions only to the extent the total exceeds 0.5% of their contribution base, which is generally AGI. A taxpayer with $400,000 of AGI loses the first $2,000 of giving.
Does the 0.5% floor apply if I take the standard deduction? No. Non-itemizers can deduct up to $1,000 of cash gifts, or $2,000 on a joint return, on Form 1040, line 12f (draft, as of October 2026), and the statute computes that deduction without the 0.5% floor.
Is the 2026 Schedule A really two pages? Yes, based on the IRS draft created 5/12/26 (draft, as of October 2026). Page 1 covers medical expenses, taxes and interest through line 10. Page 2 covers gifts to charity through line 19. The final form could still change.
What is the SALT cap for 2026? It is $40,400 ($20,200 if married filing separately), reduced by 30% of MAGI above $505,000, with a $10,000 minimum. The cap falls to $10,000 for tax years after 2029.
How does the 2/37 limitation affect high earners? Section 68 reduces itemized deductions by 2/37 of the lesser of the deductions or the income above the start of the 37% bracket. For someone fully in that bracket, each dollar of itemized deductions saves about 35 cents.
Madras Accountancy works with US CPA firms on individual and business tax return preparation and review, including Schedule A worksheets, SALT calculations and itemize versus standard deduction comparisons. To talk through support for the 2026 filing season, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
