How do AGI limits and carryover rules work for large charitable gifts to public charities like Tunnel to Towers?
Executive summary
Large cash gifts to public charities such as Tunnel to Towers are generally deductible up to 60% of the donor’s adjusted gross income (AGI), with gifts of appreciated securities limited to 30% of AGI, and excess amounts may be carried forward for up to five years under longstanding Code rules [1] [2]. Beginning in tax year 2026 the One Big Beautiful Bill Act (OBBBA) adds a new wrinkle: itemizers may only deduct the portion of charitable contributions that exceeds 0.5% of AGI and high‑income taxpayers face a cap on the value of itemized deductions, while carryovers that originated before 2026 are treated differently when applied in later years [3] [4] [5].
1. How the basic AGI percentage limits work for public charities
For cash gifts made directly to qualifying public charities, the law allows a deduction of up to 60% of AGI in the year of the gift; gifts of long‑term appreciated securities to public charities are subject to a lower 30%‑of‑AGI ceiling, and gifts to private foundations face still tighter limits [1] [6] [2]. Those percentage limits remain the primary gating factor: if a donor’s large contribution exceeds the applicable percent‑of‑AGI cap for the year, the donor cannot claim the excess in that tax year but can generally preserve value through the carryforward rules described below [2].
2. The new 0.5% AGI floor and how it interacts with deductions
Starting in 2026, itemizing taxpayers must clear a floor equal to 0.5% of AGI before any charitable deduction is allowed for the year — meaning the first 0.5% of AGI in donations produces no itemized deduction at all [3] [7]. The floor is applied in the ordering rules specified by statute and is calculated after the usual AGI‑based caps; practitioners warn that donors should plan for the floor to reduce or eliminate deductions for smaller gifts and to slightly blunt the tax value of very large gifts, especially for those near the top tax brackets [4] [8].
3. Carryover mechanics for excess charitable contributions
When a donor makes contributions that exceed the annual AGI percentage limits, the excess deduction amount may be carried forward for up to five succeeding tax years under Code Section 170 carryforward rules, allowing multi‑year utilization of a large gift’s tax value [1] [2]. The new law preserves the five‑year carryforward framework but creates complexity because carryovers are subject to ordering rules and to the post‑2025 floor and other limitations in particular ways detailed by tax advisers [4] [2].
4. Important transitional and ordering rules to watch
A critical relief provision: carryover amounts originating from contributions made before Jan. 1, 2026, are not subject to the new 0.5% floor when they are used in later years — a distinction that makes timing donations in 2025 versus 2026 material for tax planning [4] [9]. Tax commentators also emphasize that the statutory ordering of contribution types (capital gain property to private foundations first, then to public charities, then cash to public charities last) affects which gifts are limited and which excesses become carryovers, so the mix of cash and appreciated assets matters for a large donor [4].
5. Practical implications for a large donor to Tunnel to Towers
A donor contemplating a big cash gift to a public charity such as Tunnel to Towers can generally deduct up to 60% of AGI for that cash portion in the year of the gift and carry forward any excess for up to five years, but must plan around the 0.5% floor for 2026 onward and consider whether donating appreciated stock (30% cap) or using vehicles like donor‑advised funds, QCDs, or bunching strategies better preserves tax value — recognizing that some above‑the‑line benefits and DAF rules differ and that DAF grants and some above‑the‑line deductions exclude certain vehicles [1] [10] [11] [9]. Tax advisers in the sources urge weighing timing (e.g., giving in 2025 vs. 2026), the asset type being donated, and whether to bunch gifts or use a DAF to smooth philanthropic intent against the new floor and cap on itemized deduction value [8] [11] [9].
6. Where reporting leaves open questions and the policy frame
The described sources agree on the permanent 60% cash cap and the new 0.5% floor and five‑year carryforward, but they also flag complexity (ordering rules, interaction with the cap on itemized deduction value for top bracket taxpayers, and exclusions for DAFs or private foundation transfers from certain above‑the‑line benefits) that requires individualized tax analysis and explicit modeling — the guidance in these firm and trade publications is practical but not a substitute for a preparer’s review of a particular donor’s facts [1] [4] [5] [10].