Picture a couple with $300,000 of income who itemize and give $2,500 to their church this year. Under the new rules, the first $1,500 of that gift earns them nothing on their taxes. Give $25,000 and the same $1,500 vanishes. That's the quiet change in Laura Saunders's Tax Report in the Journal this weekend. Most of the year's tax rules lock on Dec. 31, 2026. Here's the list.
The charity rules changed in two directions. Itemizers now lose a slice of their charitable deduction. The slice equals 0.5% of adjusted gross income, the AGI line on the return. People who don't itemize get something new. A joint return can now deduct up to $2,000 of cash gifts to charity. A single return can deduct up to $1,000. Used clothes don't count. Gifts to donor-advised funds don't count either. And a new cap trims what any deduction is worth to top-bracket filers. Each dollar of itemized deductions now saves them 35 cents instead of 37.
That math pushes many givers toward bunching. The idea is simple. Take the standard deduction one year. The next year, pile two years of gifts together and itemize. For 2026 a married couple's standard deduction is $32,200. A single filer's is $16,100. Anyone 65 or older adds at least $1,650 more. The SALT deduction, for state and local taxes, tops out at $40,400 this year. That holds for joint and single filers alike with income up to $505,000. At about $606,000 of income it falls to $10,000, says San Francisco CPA Richard Pon. One rule didn't move. A qualified charitable distribution, or QCD, is a gift sent straight from a traditional IRA by someone 70½ or older. The new floor doesn't touch it. Saunders says it's often the most tax-efficient way to give.
Watch Line 11a
Saunders points to one number on the whole return, AGI on Line 11a of Form 1040. More than a dozen rules key off it. The SALT, overtime and tips deductions. The tax on Social Security. The Irmaa surcharges on Medicare premiums. The 3.8% tax on investment income. Itemized deductions don't lower AGI, and neither do the new senior, tips and overtime breaks. What does lower it, Pon says, is pretax money into a 401(k), a traditional IRA, an HSA or an FSA, plus realized capital losses and business expenses for owners. Splitting a big stock sale between December and January can help too. Medical costs count only above 7.5% of AGI, though Medicare premiums are in that pile.
Then check the plumbing. The IRS wants 90% of the year's tax paid in on time, or a penalty applies. For tax on wages and IRA payouts, the cutoff is Dec. 31, 2026. For quarterly estimates it's Jan. 15, 2027. The penalty rate has run 7% for most of 2026. There's a safe harbor too. Pay 100% of last year's tax if your income is $150,000 or less, or 110% if it's more, and you're clear. If you're short, having more tax withheld from a paycheck or a taxable IRA payout can erase the penalty. Tim Steffen of Baird warns that this year "back-of-the-envelope calculations aren't reliable." Run a real projection.
Our read
Tax, with a foot in Retirement, M10. The 0.5% floor is small on paper and large in habit. Giving the same amount every year is now the least efficient way to do it. Bunching two years of gifts into one, or giving through a QCD after 70½, puts more of each dollar to work. And for the educators we serve, the pretax deferral into the plan at work is one of the few levers that lowers AGI itself. Lower AGI can mean a smaller Irmaa bill two years out and less tax on Social Security. These are general planning principles, not advice for anyone's return.
Here's where it touches your plan this week. Pull last year's Form 1040 and find Line 11a. Take 0.5% of it. That's about the slice of this year's gifts that won't count if you itemize. If you're 70½ or older with a traditional IRA, ask your custodian for the QCD form before the December rush. Then look at your pretax contribution election at work and ask whether one more paycheck of pretax money moves you under a threshold. You don't wait for the first drop to find the umbrella. Bring the return to your next review and we'll walk the list together.