If you run a business, or have clients that run a business, you may have caught wind of the changes to the charitable deduction rules that apply to corporations. Here's what you need to know:
New 1% floor begins in 2026. Corporations can only deduct charitable contributions exceeding 1% of taxable income. For example, a company with $100 million in taxable income must give more than $1 million to claim any charitable deduction—and only amounts above $1 million are deductible.
10% ceiling remains with added complexity. The existing 10% deduction limit still applies alongside the new 1% floor. Only contributions between 1% and 10% of taxable income are deductible. Non-deductible amounts can be carried forward for up to five years, subject to the same floor and ceiling constraints.
Immediate action steps:
- Review 2025 strategies now. Maximize deductions before the floor takes effect by exploring corporate donor advised funds at the community foundation.
- Consider sponsorship alternatives. Charity sponsorships providing direct business benefits (such as advertising) remain deductible as marketing expenses, not subject to the new charitable deduction limits.
Contact the community foundation team to optimize your corporate giving strategy before these changes take effect.