Nonitemizer Benefit – Taxpayers who take the standard deduction on their tax return are allowed an above-the-line charitable deduction for a gift of cash to a qualified nonprofit up to $1,000 for a single taxpayer or $2,000 for a married couple filing jointly in 2026 and subsequent years. This change creates a new opportunity to give directly to local churches and ministry funds even without itemizing deductions. The new above-the-line deduction is not available for gifts to donor advised funds (DAF). This permanent nonitemizer deduction may be taken in addition to the standard deduction and enhanced senior deductions. As a reminder, charitable gifts over $250 must meet the contemporaneous wrien acknowledgement rules. This rule is particularly relevant for annual giving statements issued by local churches.
Changes for Itemizing Taxpayers – Taxpayers who itemize their deductions for tax purposes have two major changes in 2026. A new 0.5% floor on charitable deductions for gifts began in 2026. The taxpayer will not be able to deduct charitable gifts for the first 0.5% of the contribution base. The contribution base for most taxpayers is their adjusted gross income (AGI). In addition to the 0.5% charitable floor, the new law imposes a limitation on itemized deductions. This limit will impact high income earners. Taxpayers in the 37% bracket will face a maximum savings cap at 35% for their itemized deductions. These changes may influence how major contributors to United Methodist ministries structure their annual and legacy giving.
IRA Charitable Rollover — The IRS refers to the IRA charitable rollover as a qualified charitable distribution (QCD). An individual over age 70½ is permitted to make a direct transfer from his or her IRA to a qualified charity up to $111,000 in 2026. The transfer is not included in taxable income. If the IRA owner is over age 73, the distribution may fulfill part or all of the IRA owner’s required minimum distribution (RMD). This remains a particularly important tool for retirees supporting United Methodist congregations, missions, and endowment funds through the United Methodist Foundation of Michigan. If the donor elects to use their once-in-a-lifetime QCD to fund a charitable gift annuity or charitable remainder trust, the maximum in 2026 is $55,000. The QCD is beneficial for non-itemizers and itemizers, because it is not subject to the charitable floor or caps. The QCD must be to a qualified exempt charity and may be for a designated purpose. However, transfers to donor advised funds currently are not permitted. In addition, transfers may not be for a charity event that involves a partial benefit to the donor. The entire QCD must be for a qualified charitable purpose.