Last July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) into federal law, with many of its provisions — including key tax changes — fully taking effect at the start of 2026.
The new tax laws will likely see an increase in tax deductions on charitable donations for many people. So, what’s changed?
I sat down with Br. Muhammad Arefin, our newest addition to our growing Dar-us-Salaam Finance team led by Br. Sayeed Jaweed, to gain insight into what the new tax laws means for our donors. With nearly 20 years of experience in financial accounting and auditing—including over 10 years in nonprofit accounting—Br. Muhammad has joined Dar-us-Salaam full-time and brings valuable expertise to our financial operations.
Q: We heard there’s a new dollar-for-dollar tax benefit for donors who file their taxes using the standard deduction method. How can we use this for our benefit?
A: Starting in 2026, under this provision, single filers can deduct up to $1,000, and married couples filing jointly can deduct up to $2,000 in charitable contributions directly from their taxable income. This deduction is available in addition to the standard deduction, making it especially valuable for the majority of the taxpayers who don’t itemize. In simple terms, your charitable giving can lower your taxable income in addition to your regular standard deduction, making it easier for every donor to give and receive a tax benefit. To qualify, donations must be made in cash—including checks or credit card payments and given directly to qualified public charities such as Dar-us-Salaam.
For example: Ahmed, a single filer, donated $1,500 in cash to Dar-us-Salaam. Under the new provisions, he can deduct up to $1,000 of those gifts even if he doesn’t itemize. Assuming a 22% federal tax rate, this could reduce his taxes by approximately $220. The remaining $500 would only be deductible if he chooses to itemize.
Before this change in the tax law, charitable contributions generally provided a tax benefit only for those who itemized their deductions; this new provision now gives standard-deduction filers a new incentive to support the charities they love.
Q: Does that mean if a married couple who is filing jointly using the standard deduction makes a donation of $3,000 that only $2,000 of that donation amount can be deducted from their taxes? Also, does it have to be in one donation?
A: Yes, the remaining $1,000 would not be deductible for federal tax purposes (unless they itemize, which is a different scenario). As for it being in one donation – it doesn’t have to be a single donation. You can make multiple contributions to one or more eligible charities throughout the year, and they all count toward the $2,000 limit. Just be sure to keep your donation receipts for tax filing purposes.
Q: Can you explain how this would work if a married couple made $100,000 of Adjusted Gross Income (AGI) in 2026?
A: Let’s take an example of a married couple in 2026 with a $100,000 AGI who take the standard deduction of $32,200.
$100,000 – $32,200 = $67,800 of taxable income.
On top of the standard deduction, they can now deduct up to $2,000 in charitable contributions. If the couple donate $500 each to four different charities throughout the year, their taxable income is further reduced from $67,800 to $65,800, lowering their overall tax bill. Any donations beyond the $2,000 limit would not provide additional deductions for the year.
Q: Can this tax benefit also potentially push someone down into a lower tax bracket?
A: Yes, especially if your income is near the top of a tax bracket, that extra $1,000 or $2,000 in charitable deductions can lower your taxable income enough to move into a lower bracket, potentially saving you even more on your taxes.
Let’s say another married couple makes $84,000 AGI. If you take out the standard deduction of $32,200 that leaves them with $51,800 taxable income, which is just above the 22% tax bracket threshold ($50,400). By donating $2,000 throughout the year, they can deduct that and make their AGI $49,800 – effectively lowering their tax bracket and saving themselves thousands of dollars in
tax payments.
Q: Does this bill only affect federal tax laws?
A: No, there’s also changes to state and local tax (SALT) laws. The SALT cap deduction for those with an AGI below $500,000 has increased from $10,000 to $40,000 from 2025 through 2029. Because the SALT cap is higher, some taxpayers in high‑tax states may find it easier to itemize rather than take the standard deduction. For taxpayers who still take the standard deduction, the SALT increase has no direct effect on charitable giving rules — they still benefit from the above‑the‑line charitable deduction ($1,000 single / $2,000 joint) regardless.
Other Key Changes
New floor on deductions for itemizers For those who itemize deductions, there is now a 0.5% floor (baseline) on charitable contributions. This means you can only deduct the portion of your donations that exceeds 0.5% of your AGI. For example, if Abdullah’s AGI is $100,000 and he donates $2,500 to Dar-us-Salaam, the 0.5% floor equals $500. Only the amount above that floor—$2,000—would be eligible for a tax deduction, while the first $500 is not deductible.
New limits to deductions for itemizers in the top tax bracket
For taxpayers in the top federal tax bracket who itemize, charitable deductions are now limited to 35% of their AGI. This means that even if you donate more than this amount, only up to 35% of your AGI can be deducted in that tax year. This cap is lower than the 37% limit that applied in 2025.
