Updated July 28, 2026. Quick answer: IRC §68 was rewritten to cap the tax benefit of itemized deductions rather than the deductions themselves. A donor in the top bracket now recovers at most 35 cents per charitable dollar, not the 37 their marginal rate would suggest. Every “a charitable gift costs you only (1 minus your rate)” calculation written before 2026 now overstates the benefit for high earners.
What changed
Previously the value of a deduction followed your marginal rate: a dollar deducted in the top bracket saved you the top rate. The rewritten §68 breaks that link at the top, reducing the benefit so that the effective recovery is capped below the top marginal rate.
| Bracket | Recovery per charitable dollar |
|---|---|
| Below the top | Broadly your marginal rate |
| Top bracket | Capped — at most 35 cents |
Two things changed for 2026 and most guidance has not caught up. First, IRC §170(b)(1)(I) now imposes a floor of 0.5% of your contribution base — the first half-percent of your giving is not deductible at all, and the IRS has confirmed amounts below the floor are simply lost. Second, IRC §68 was rewritten to cap the benefit of itemized deductions, so a taxpayer in the top bracket now recovers at most 35 cents per charitable dollar rather than 37. Both come from P.L. 119-21 — the same act that rewrote the QSBS rules.
Who this actually changes behaviour for
The people who give the most. A high-bracket donor comparing a cash gift against a gift of appreciated stock is now working with a smaller deduction benefit on the cash side, while the capital-gain avoidance on appreciated stock is unaffected by §68. That shifts the balance toward giving securities rather than cash, and the shift is new this year.
Combined with the new 0.5% floor, the deduction is squeezed from both ends in the same tax year — a floor at the bottom and a benefit cap at the top. Anything written before 2026 describes neither.
No dollar figures appear here, and that is deliberate. The QCD annual cap is inflation-indexed and the figure printed in IRC §408(d)(8)(A) is the original un-indexed amount, which the statute will keep reciting forever. AGI ceilings are percentages, not amounts. Take current dollar limits from the IRS for the year in question, never from an article.
Sources
IRC §170(b)(1)(A), (b)(1)(C), (b)(1)(D), (b)(1)(G), (b)(1)(I) and (d)(1); §170(e)(1) and (e)(5); §170(f)(11) (appraisal); §68 as amended; §408(d)(8) (qualified charitable distributions); §4966(d)(2) (donor-advised funds); §664(d)(1) and (d)(2) (charitable remainder trusts). Amendments from P.L. 119-21. IRS Publication 505 (2026) for the 0.5% floor’s first application year. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.