In 2026 and beyond, two provisions of the new tax law (the “One Big Beautiful Bill Act” or OBBBA) will have an impact on the size and tax deductibility of charitable gifts for taxpayers who itemize, especially those in the highest tax bracket. 

Together, these changes reward “bunching” — consolidating your charitable giving into every other year or every third year rather than spreading donations evenly across several years. A Pomona Plan life income gift can be an especially effective part of a bunching strategy because it allows you to take a relatively large charitable donation up front while still retaining income from your gift.  

Smaller Deductions for Itemizers

Beginning this year, taxpayers who itemize may deduct only the portion of their charitable contributions that exceed 0.5% of their modified adjusted gross income (MAGI). This is sometimes called the “floor” on deductions. The floor varies based on taxpayer income, not on how much they give.  

Take Jerry and Ceclia, for example, a retired couple both age 80 with $200,000 in MAGI. They plan to give $20,000 to charity each year, but under the new law the first $1,000 of that is simply not deductible. Over four years, that floor costs them $4,000 in lost deductions — $1,000 slipping away each time the calendar resets. But by also funding a Pomona Plan gift annuity with $100,000, they can boost their retirement income while recouping some of that lost ground. The annuity will provide an upfront charitable deduction of around $30,000 while also offering income of $650 per month for their joint lifetimes. In the year they fund their Pomona Plan annuity, the $1,000 floor applies just once, permitting a total deduction that year of $49,000.

High Earners Face Extra Cut

For taxpayers in the 37% bracket — single filers with taxable income above $640,600 or married filers above $768,700 — a further portion of itemized deductions is also disallowed. The amount is calculated by multiplying 2/37 by the lesser of:
the amount of income taxed at the top rate, or total net itemized deductions. 

Although it’s a more dynamic limit than the floor, the ceiling also applies annually, and bunching tends to yield meaningful increases in the overall amount you can deduct.  

Your IRA: A Powerful Exception

Individuals age 70½ and older can now make a one time qualified charitable distribution (QCD) of up to $55,000 from their IRA to fund a life income gift. These contributions are exempt from the new tax law’s “floor” and “ceiling” provisions, count toward your required minimum distribution and are not included in your taxable income — making them a highly effective giving option.

Where the Pomona Plan Fits In

Unlike a donor-advised fund, a Pomona Plan life income gift doesn’t just improve your tax picture: it provides fixed, secure income for life. Your gift substantially reduces your taxes and delivers dependable payments you can’t outlive. If you’re also looking to protect your financial security while supporting Pomona’s educational mission, that combination can’t be beat.

We’re happy to walk you through how bunching impacts your charitable giving strategy or how an IRA charitable distribution could work for you. Please contact the Pomona Plan at (800) 761-9899 or pomonaplan@pomona.edu.