Podcast Summary: ACTEC Trust & Estate Talk

Episode: "Your Income Tax Charitable Deductions Are Different in 2026"

Date: January 6, 2026
Host: Natalie Perry, ACTEC Fellow, Chicago
Guest: Professor Christopher Hoyt, ACTEC Fellow, University of Missouri School of Law, Kansas City

Episode Overview

This episode explores the sweeping changes to charitable income tax deductions effective in 2026 due to the "One Big Beautiful Bill Act" (OB3/BBBA). Professor Christopher Hoyt breaks down what individuals, particularly wealth planners and donors, need to know to maximize their charitable giving under the new rules. The discussion centers on the expansion of charitable deductions beyond traditional itemizers, the creation of a new category for tax credits, and critical rule changes for both high-income taxpayers and those over age 70½.

Key Discussion Points & Insights

1. Expansion of Charitable Deductions to Non-Itemizers

(01:18 - 02:38)

• Before: Only about 10% of taxpayers (itemizers) could claim a charitable income tax deduction.
• 2026 Change:
  • Now, non-itemizers can deduct qualified cash charitable gifts:
    • Up to $1,000 for single filers
    • Up to $2,000 for married joint filers
  • Requirements:
    • Must be a cash or credit card gift (not property, clothing, or household items).
    • Not available for gifts to donor-advised funds, private grant foundations, or supporting organizations.
    • Gifts of $250+ require a contemporaneous written acknowledgment from the charity.
• Quote:

  “More people will be able to deduct their charitable gifts in 2026 because we now have a tax deduction for non itemizers.”
  — Christopher Hoyt (01:38)

2. Introduction of a New Tax Credit for K–12 Scholarship Organizations

(02:38 - 04:06)

• New Category:
  • Direct tax credit for cash donations to state-certified K–12 scholarship granting charities.
  • Credit Limits:
    • Up to $1,700 for individuals
    • Up to $3,400 for married joint filers
• Eligibility:
  • Donor and charity must be in the same state.
  • Grants go to K–12 students from families earning less than 300% of the area median income (e.g., in Kansas City: $80k median, under $240k qualifies).
  • Cannot earmark donations for specific students.
• Scholarships are tax-free to the recipients.
• Quote:

  “If you give $100 to this charity, you reduce your federal income tax bill by $100.”
  — Christopher Hoyt (02:55)

3. Itemized Deduction Expansion (2026–2029) & SALT Limit Increase

(04:06 - 05:01)

• More Itemizers: Expected increase from 10% to 14% of taxpayers itemizing.
• State and Local Tax (SALT) Deduction:
  • Temporarily increased cap: up to $40,400 can be deducted in 2026.
  • Phase-out for high earners:
    • Begins at $500,000 income
    • Ends at $600,000 (those above revert to old $10k limit)
    • Strategic tax planning opportunity for those near the threshold.
• Quote:

  “If a taxpayer's income [is] over $600,000, they're stuck with the old $10,000 limit.”
  — Christopher Hoyt (04:51)

4. Age-Based Strategies for Charitable Giving from IRAs

(05:01 - 05:56)

• 70½ and Older:
  • Eligible for qualified charitable distributions (QCDs)—direct IRA gifts to charity are excluded from income, providing maximum tax benefit and bypassing new deduction limits.
• Under Age 70½:
  • Avoid IRA gifts: Can incur income tax and (if under 59½) a 10% penalty.
  • For under-70½ itemizers, appreciated stock is generally best for charitable giving.
• Quote:

  “For those donors who are over the age of 70 and a half, they should use their IRA for all charitable gifts.”
  — Christopher Hoyt (07:47)

5. Two Significant Reductions to Itemized Charitable Deductions in 2026

(05:56 - 07:35)

1. AGI Reduction Threshold:

   • Can only deduct charitable gifts that exceed 0.5% (½ of 1%) of adjusted gross income (AGI).
   • Example: Married couple, $200k AGI, gives $5,000 → can only deduct $4,000; $1,000 (0.5% of AGI) is not deductible.
   • Quote:

     “They have to reduce their tax deductions by 1/2 of 1% of their income.”
     — Christopher Hoyt (06:30)

2. 35% Cap for Highest Bracket:

   • Highest earners (in the 37% tax bracket) can only receive a 35% tax break on itemized deductions.
   • Effectively, there’s a 2% “tax” on charitable gifts for this group.
   • Applies to trusts and estates, which reach 37% bracket with as little as $16,000 income.
   • Quote:

     “If a taxpayer is in the 37% tax bracket, the highest tax bracket, they can only get a 35% tax break from their itemized deductions, including charitable gifts.”
     — Christopher Hoyt (06:53)

Memorable Quotes & Notable Moments

• Star Wars Reference:

  “In Washington they're calling it OB3, which I like because it has sort of a Star Wars connotation. And as we look at these rules, these rules on charitable tax deductions look like they did come from a galaxy far, far away.”
  — Christopher Hoyt (01:25)

• On IRA Gifts' Simplicity:

  “They will avoid the complexity I'm about to talk about.”
  — Christopher Hoyt, advocating IRA gifts for those 70½+ (05:16)

• Practical Takeaway:

  “The new tax law has made IRA giving more advantageous for taxpayers over the age of seven and a half.”
  — Christopher Hoyt (08:29)

Timestamps for Important Segments

• [01:18] — Main overview of 2026 charitable deduction changes.
• [02:38] — Introduction of tax credit for state-certified K–12 scholarship charities.
• [04:06] — Temporary increase in the SALT deduction limit; strategic planning for high earners.
• [05:01] — Age-based charitable giving strategies, QCDs from IRAs.
• [05:56] — Detailed explanation of the new limitations on itemized deductions: AGI threshold and 35% cap.
• [07:47] — Recommendation for over-70½ taxpayers: prioritize IRA charitable gifts.

Summary & Takeaways

• 2026 brings major new opportunities for charitable deductions, particularly for non-itemizers and donors interested in K–12 educational support.
• High-net-worth individuals and those near phase-out thresholds should carefully strategize their giving, especially with new limits and caps in place.
• Taxpayers over age 70½ can maximize benefits and minimize complexity with IRA qualified charitable distributions.
• Advisors and donors should be aware of new thresholds to optimize tax efficiency under OB3.

For listeners seeking wealth planning guidance under the 2026 rules, this episode offers timely, practical insights directly from subject-matter experts.