Charitable Contribution Carryover: 2026 Rules, OBBBA Changes, and the Expiration Risk

Not tax or legal advice. Carryover tracking and optimization strategy depend on your AGI, asset mix, income projections, and filing status. Work with a fee-only advisor to build a multi-year model for your situation.

The deduction has a ceiling. The gift doesn't.

When you make a large charitable contribution — funding a Donor-Advised Fund with a concentrated stock position, contributing to a CRT, or making a major gift during a business sale — your deduction in that tax year is capped at a percentage of your adjusted gross income. The gift is complete and irrevocable. The tax benefit, however, can only be absorbed in limited doses each year.

The carryover rule solves this mismatch. Under IRC §170(d)(1), excess charitable contributions that exceed the applicable AGI limit carry forward and can be deducted over the following five tax years, subject to the same percentage limits.¹

For HNW donors who make large, lumpy gifts — a $1M DAF contribution in a liquidity-event year, a CRT funded with $3M of appreciated real estate — carryovers aren't an edge case. They're the expected result. Understanding how they work, how they interact with 2026's OBBBA changes, and how to avoid losing them to expiration is central to maximizing the lifetime tax value of your giving.

2026 AGI percentage limits

The percentage that applies depends on the type of property you contributed and the type of organization that received it.¹

The carryover applies any time a contribution exceeds these limits. A $600,000 cash gift to a DAF in a year when your AGI is $700,000 creates a $60,000 carryover ($600K − $420K, which is 60% of $700K). A $400,000 appreciated stock gift to a DAF in the same year creates a $190,000 carryover ($400K − $210K, which is 30% of $700K).

The 5-year carryover period

Excess contributions carry forward for exactly five tax years — no more.¹ The year of contribution is year zero. The carryover can be used in years one through five. If not fully absorbed by the end of year five, the remainder is permanently lost.

For donors who make a large gift in a year with a relatively low AGI — a gap year, a sabbatical, an early retirement — the 5-year clock can become a real problem. If your income doesn't recover quickly enough to absorb a large carryover, you'll lose the deduction.

Worked example: large DAF contribution

A married couple funds a DAF with $800,000 of appreciated stock (long-term capital gain property) in 2026. Their AGI in 2026 is $700,000.

• 30% AGI limit for appreciated property: $210,000
• OBBBA 0.5% AGI floor disallowed: $3,500 (0.5% × $700,000) — added back to carryover (see below)
• Deductible in 2026: $210,000 − $3,500 floor = $206,500
• Carryover to 2027–2031: $800,000 − $210,000 + $3,500 floor add-back = $593,500

Total deductions across 5 years: $206,500 + $177,000 + $177,000 + $177,000 + $59,500 = approximately $797,000 — nearly the full $800,000 gift. The 5-year window is sufficient here because AGI remains high enough to absorb the 30% limit each year. If AGI had dropped significantly — to $200,000 in years 2–5 — only $60,000 per year would be available, and the remaining $233,500 carryover from 2026 would expire unused at the end of 2031.

2026 OBBBA changes and how they interact with carryovers

The 0.5% AGI floor — and why the floor amount is added back to your carryover

Starting in 2026, the OBBBA requires that the first 0.5% of your AGI be excluded from any charitable deduction.³ On a $700,000 AGI, the first $3,500 of charitable contributions is disallowed each year you itemize.

When that disallowed floor amount would otherwise have been part of a contribution that creates a carryover, Congress added a specific rule to prevent the floor from applying twice. Under IRC §170(d)(1)(C), the amount already disallowed by the floor is added to the excess contribution carried forward.⁴ This means the same dollars are never subject to the 0.5% floor in both the contribution year and a future carryover year.

In practice: if you contribute $400,000 and can only deduct $180,000 (30% limit) minus $3,000 (0.5% floor) = $177,000, your carryover is $400,000 − $180,000 + $3,000 = $223,000 — not $220,000. The $3,000 floor amount that was disallowed rides along with the carryover.

Pre-2026 carryovers: the floor does not apply

If you made a large charitable contribution in 2024 or 2025 that generated a deduction carryover under the old rules, that carryover is not subject to the new 0.5% floor when you use it in 2026 and subsequent years.³ The floor only applies to contributions made on or after January 1, 2026.

If you have a pre-2026 carryover balance, your 2026 deduction is structured as:

1. Pre-2026 carryover balance — no floor applies to this portion
2. Current-year (2026) contributions — 0.5% floor applies

Your advisor will need to track these two pools separately on your return.

The 35% benefit cap for 37% bracket filers

If you're in the 37% federal bracket (2026: $751,600+ MFJ taxable income), the OBBBA caps the tax benefit of all itemized deductions — including charitable — at 35%.³ A $200,000 charitable deduction saves at most $70,000 in federal tax, not $74,000. This cap applies each year you use the carryover, not just the year of contribution. If your income fluctuates across the 5-year carryover window — perhaps you have a high-income year followed by a lower-income year — you may find the 35% cap applies in some years but not others.

The new non-itemizer deduction (2026)

Starting in 2026, even taxpayers who don't itemize can deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash charitable contributions.³ This doesn't create a carryover mechanism — non-itemizers still can't carry excess forward — but it's relevant context for donors whose income drops enough in a carryover year to take the standard deduction. In those years, the carryover is not usable (it only applies when itemizing), but the non-itemizer deduction provides a small consolation for cash gifts made in that low-income year.

When carryovers expire: the real risk for donors

The 5-year clock is absolute. There's no extension, no hardship exception. A 2026 contribution that generates a carryover expires on December 31, 2031.

Four scenarios where carryovers are at expiration risk:

• Early retirement. A donor who makes a large gift in their final high-income year, then retires with significantly lower income, may not generate enough AGI in years 1–5 to absorb a large carryover. A $500,000 appreciated-property carryover requires $1.67M of cumulative AGI at the 30% limit just to absorb it — that's $333,000/year over 5 years. Post-retirement AGI of $200,000/year yields only $300,000 of absorption capacity.
• Income disruption. Business losses, leave of absence, or a gap year can reduce the year's absorption capacity to near zero while the clock keeps running.
• Gift to a private foundation. The 20% limit for appreciated-property contributions to private foundations — half the rate for DAF contributions — means a given AGI can only absorb half as much carryover per year. A $1M stock gift to a private foundation on a $500,000 AGI creates a $900,000 carryover that takes 9 years to absorb at the 20% rate — but the carryover expires in 5.
• Bunching too aggressively. A donor who contributes 5 years of giving in a single year may create a carryover that spans into years where they're also making current contributions. The FIFO ordering means the carryover gets priority, but the 30% or 60% cap still limits annual absorption.

Strategic uses of carryovers

Front-loading into a business sale or liquidity event year

The carryover mechanism is most powerful when used intentionally. A business owner expecting a $5M sale in 2026 can contribute $3M to a DAF — far above 60% of the sale-year AGI — knowing the excess will carry forward into the years after the sale when earned income is still elevated.

Example: $5M business sale year creates $5.5M AGI. A $3M cash DAF contribution is limited to $3.3M (60% of $5.5M), so in this case the full $3M is deductible in year one. But if the donor also contributes $2M of appreciated stock from their portfolio (30% limit = $1.65M), the $350,000 excess carries forward — available as a deduction in 2027 and beyond when post-sale investment income continues.

Coordinating with Roth conversion years

Donors doing multi-year Roth conversions can time carryover absorption with conversion income. A $150,000 Roth conversion in year 2 adds to AGI, raising the absolute amount of charitable deduction that can be absorbed that year. Instead of the carryover expiring in year 5, a conversion-heavy year in year 2 absorbs the carryover faster and at a better marginal rate.

CRT and CLT funding

Contributions to fund a Charitable Remainder Trust or Charitable Lead Trust follow the same AGI limits and carryover rules. A large CRT funded with real estate in a single year commonly creates a 30%-category carryover. The CRT charitable deduction — based on the present value of the remainder interest, not the full funding amount — is itself subject to carryover if it exceeds the limit in the funding year.

Tracking your carryovers

Carryovers are reported on Form 8283 (for noncash contributions) and tracked on Schedule A. Each carryover pool maintains its percentage category: a 30% carryover can only be used against the 30% limit in future years (not the 60% limit). If you have both a 60% carryover and a 30% carryover from different contribution years, they are tracked and applied separately.

Your tax return from the contribution year should show the carryover amount. Keep records through the entire 5-year window — carryovers need to be documented if ever audited.

Common mistakes

• Not realizing a carryover exists. Many donors who fund a large DAF with appreciated stock in a high-income year don't track their resulting 5-year carryover. It shows up on the tax return, but without proactive tracking it gets forgotten — and may expire without use.
• Contributing to a private foundation when the carryover math doesn't work. The 20% limit on appreciated property to private foundations can make it nearly impossible to absorb a large carryover in 5 years unless AGI remains very high. A DAF — at 30% for appreciated property — provides much more absorption capacity for the same carryover period.
• Ignoring the FIFO ordering when planning future contributions. Donors with an expiring carryover who are also planning new contributions in the same year need to model carefully: the current-year contribution is deducted first, potentially leaving less room for the expiring carryover. A specialist will structure the timing so the carryover isn't crowded out.
• Assuming the floor doesn't apply to carryover years. The 0.5% OBBBA floor applies fresh each year to your current-year charitable contributions, and it also limits the absorption of carryovers (except for the floor-amount add-back on the original carryover). Some donors conflate "the floor was already applied" with "no floor applies going forward" — that's wrong.
• Not modeling the income trajectory before making a large gift. The single most important question before creating a large carryover: will your AGI remain high enough over the next 5 years to absorb it? A charitable planning specialist models this before you write the check.

What a specialist models for you

Managing carryovers across a 5-year window involves tracking multiple variables simultaneously:

• Current carryover balance by year and percentage category
• Projected AGI for years 1–5 of the carryover window
• Interaction with current-year contributions under the FIFO ordering rule
• OBBBA 0.5% floor and 35% cap applied each year
• State income tax treatment — some states do not conform to federal charitable deduction rules or allow carryovers on different terms
• Expiration risk: is the projected 5-year AGI sufficient to absorb the full carryover, or should you consider a different gift structure?

For donors with carryover balances above $200,000, the multi-year modeling often reveals $30,000–$100,000+ of incremental tax savings versus unoptimized tracking — from better carryover absorption timing alone.