The U.S. tax code is changing in 2026 in ways that directly affect how companies budget, structure, and report their charitable giving. These changes introduce new incentives, new compliance expectations, and new opportunities for employers to build corporate giving programs that drive employee engagement and financial efficiency.
This guide breaks down what CFOs, HR leaders, and CSR teams need to know about the new 1% corporate giving floor, how to structure corporate giving going forward, and how Percent Pledge can help centralize and simplify everything.
The 2026 Corporate Giving Rule: Understanding the New 1% Floor
Starting January 1, 2026, corporations will face a new 1% “giving floor.”
This means:
- A corporation can only deduct charitable contributions that exceed 1% of its taxable income
- The long-standing 10% cap on charitable deductions still applies
- Any giving below the 1% threshold will no longer be deductible
This is a shift from the previous model where every qualifying charitable dollar up to the 10% cap was deductible. Now small, scattered giving becomes tax-inefficient, while larger, intentional corporate philanthropy becomes more financially rational.
This is exactly why companies are moving toward centralized, strategic programs supported by tools like Percent Pledge’s Giving Platform and relying on nonprofit vetting to ensure every donation is eligible.
What This Means Financially: Examples for Businesses of All Sizes
Here are clear, CFO-friendly examples that show how deductibility changes under the new rule.
Scenario 1: Company with $10M in taxable income
- 1% floor = $100,000
- Donation of $60,000 → no deduction
- Donation of $250,000 → $150,000 deductible ($250,000 minus the $100,000 floor)
Scenario 2: Company with $50M in taxable income
- 1% floor = $500,000
- Donation of $300,000 → no deduction
- Donation of $1,000,000 → $500,000 deductible ($1,000,000 minus the $500,000 floor)
Scenario 3: Enterprise with $100M in taxable income
- 1% floor = $1,000,000
- Donation of $750,000 → no deduction
- Donation of $2,000,000 → $1,000,000 deductible ($2,000,000 minus the $1,000,000 floor)
What this means in practice
Small, ad hoc checks to a variety of nonprofits — a common historical practice — will rarely meet the 1% floor. Companies will need structured giving strategies to maximize deductibility and impact.
How the 1% Floor, 10% Ceiling, and Carryforward Rules Work Together
For CFOs and finance teams, there are three key mechanics in the new rules:
1. The 10% ceiling is still in place
The existing 10% limit on corporate charitable deductions remains unchanged. That means in any given year, a corporation can only deduct charitable contributions that fall between:
- The new 1% floor, and
- The existing 10% ceiling (of taxable income)
Anything above 10% is not deductible in the current year, and anything below 1% is below the floor.
In 2026, corporate giving becomes a strategic choice rather than a default activity.
Giving below 1% should be treated as a nondeductible engagement or brand investment.
Giving above 1% should be treated as a structured, tax-aware program.
The mistake CFOs want to avoid is unintentionally sitting just below the floor — where giving carries the administrative cost without the tax benefit.
2. How carryforward rules work now
Carryforward treatment depends on why a contribution was disallowed:
- Contributions disallowed because they exceed the 10% ceiling can still be carried forward for up to five years, just like before.
- Contributions disallowed because of the 1% floor are not automatically carried forward. They can only be carried forward if the corporation’s total contributions in that year also exceeded the 10% ceiling.
In simple terms:
- If you never hit 10% in a given year, the portion below 1% is just nondeductible.
- If you give so much that you go over 10%, the “extra” (including amounts under the floor) can be carried forward.
This changes to the carryforwards makes timing and “bunching” strategies more relevant than in prior years.
3. Strategic planning: when timing matters
Because of the new floor and the existing ceiling, timing matters more than before. Many tax professionals are already recommending that businesses:
- Consider accelerating planned donations into 2025 if they expect to fall below the 1% floor in 2026 (so that gifts are fully deductible under the old rules), or
- “Bunch” contributions into a single year so total giving clearly exceeds the 1% threshold, maximizing deductions in that year instead of spreading smaller, nondeductible amounts across many years.
For example, a company that expects to donate $200k in each of the next three years might choose to:
- Give $600k in one year (and exceed the 1% floor and approach the 10% ceiling), and
- Give little to nothing in the other years
…instead of donating $200k each year and falling under the floor each time.
This is exactly where a structured corporate giving program and clear internal planning between Finance, HR, and CSR become critical.
How Employers Should Structure Corporate Giving in 2026
The 2026 tax changes reward companies that treat charitable giving as a strategic decision rather than an ad hoc expense. To make this practical for Finance, HR, and CSR leaders, there are a few core principles and structural options to consider. Before diving into tactics, it’s worth noting:
These rules apply directly to C-corporations.
Pass-through entities (LLCs taxed as partnerships or S-corps) generally pass giving deductions through to owners, and this corporate-level floor/ceiling structure does not apply in the same way. If your organization is a C-Corp, the following structure applies directly.
1. Decide Whether Giving Is Deductibility-Driven or Engagement-Driven
In 2026, giving becomes a binary decision from a tax perspective:
- Below 1% of taxable income → Nondeductible. Treat this as a brand or engagement expense.
- Above 1% of taxable income → Deductible (up to 10%). Treat this as structured philanthropy with tax impact.
This decision point is the key shift for CFOs: you now have to decide if you want the tax benefit or if giving remains nondeductible corporate spend tied to culture and employer brand.
2. Consolidate Giving into a Centralized Program
Historically many companies approved giving in a decentralized fashion:
- Sponsorships by individual departments
- Local gala tables
- Disconnected community donations
Under the new rules, this approach often keeps total giving below the 1% floor and therefore nondeductible.
Centralization allows:
- Better budgeting and forecasting
- A single source of truth
- Clearer audit trails
- Verified nonprofit compliance
Centralized giving platforms also streamline corporate reporting and financial integration. Many companies use the Percent Pledge Giving Platform to unify grantmaking, workplace giving, and employee engagement in one place.
3. Use Corporate Grants to Cross the 1% Floor
Corporate grants are the most reliable way to exceed the 1% threshold in a structured, budget-friendly manner.
Benefits of structured grant programs:
- Predictable annual budgeting
- Transparent financial reporting
- Measurable philanthropic outcomes
- Strong CFO buy-in and audit readiness
If your corporate grants are planned early in the fiscal cycle, Finance can model expected taxable income and align your CSR budget accordingly. Percent Pledge’s grants management tools make it easy to plan, approve, and track grant schedules throughout the year.
4. Understand Where Donor-Advised Funds (DAFs) Fit — and Where They Don’t
Corporate contributions to donor-advised funds can be deductible, but they function differently than direct grants or matching.
When donors to corporate DAFs:
- Giving is deductible in the year the contribution is made
- DAF assets can grow tax-free
- Grants from the DAF to charities can be made later
However:
- DAFs are not inherently employee-engagement tools
- They can feel disconnected from CSR narratives and workforce culture
- Increasing scrutiny means DAFs should be paired with active grant strategies
For many CFOs, DAFs are a timing and cash-management tool rather than the core of a corporate giving strategy. Direct grants and matching gifts still deliver clearer impact and CFO alignment when tax efficiency and engagement both matter.
5. Leverage Matching Gifts for Dual Impact
Corporate matching gifts serve two purposes:
- They count toward the company’s charitable giving total — helping move past the 1% deduction floor
- They boost employee engagement by doubling the impact of personal donations
Matching is especially powerful in 2026 because employees themselves now receive a personal tax incentive for their first $1,000 (or $2,000 if married) of giving. Percent Pledge’s Matching Gifts solution eliminates manual forms, verifies nonprofits automatically, and drives higher participation through automation and analytics.
6. Use Dollars for Doers to Increase Engagement (and Corporate Giving)
Volunteer-to-donation programs like Dollars for Doers don’t change deductibility by themselves, but they convert employee community engagement into corporate charitable dollars that do count toward your giving totals.
These programs are a great culture driver and help expand your giving footprint across non-profits meaningful to your workforce.
Percent Pledge’s flexible Dollars for Doers allow employees to direct their volunteer grants to whichever nonprofits they care about. Rewarding employees for their volunteer service via Dollars for Doers is one of the most effective employee engagement programs.
7. Connect CSR and Finance Early
For most organizations, giving decisions are no longer purely CSR territory — they are now financial decisions.
Finance will want to know:
- Your projected taxable income and resulting 1% floor
- How much of your historical giving lives below that floor
- Whether matching gift dollars are part of the plan
- What tools will ensure clean receipts and audit trails
Giving platforms with built-in dashboards and reporting make this collaboration far smoother. Percent Pledge’s dashboards provide actionable metrics that both CFOs and CSR leaders can use for forecasting and reporting.
8. Align Giving to Broader Business Goals
Companies that treat giving as part of enterprise strategy (not just CSR) report:
- Stronger employee engagement
- Better retention and culture outcomes
- Higher workplace giving participation
- Enhanced employer brand
Whether your objective is tax efficiency, employee engagement, or external impact, structuring your corporate giving program intentionally for 2026 ensures that giving delivers on your business and financial goals.
Where to Go From Here
Structuring giving in 2026 is not about guessing — it’s about choosing a strategy:
- Nondeductible engagement focus
- Tax-aware grant and match focus
- A hybrid of both
Once you decide which path fits your business goals and tax planning, you can budget and operationalize giving with confidence. Percent Pledge helps companies implement, automate, and report on whichever strategy you choose — from grants to matching to volunteer-linked giving.
Budgeting Corporate Giving Under the New Rules: A CFO's Guide
The new 1% floor means CFOs need to take a more structured approach to giving.
A. Estimate taxable income early
Because the floor is tied to taxable income, annual philanthropic budgeting should begin when revenue forecasts are set.
B. Calculate the 1% floor
This is now your minimum threshold for deductible giving.
C. Determine your giving strategy
Three common approaches will emerge:
- Strategic Deduction Strategy
Aim to exceed the 1% floor to maximize deductibility. - Brand + Engagement Strategy
Give below the 1% floor, focusing on employer brand and employee engagement, not taxes. - Hybrid Strategy
Use employee matching + corporate grants to cross the deduction threshold efficiently.
D. Understand when giving more unlocks tax value
Because only dollars above the 1% threshold count, increasing giving from $400K to $600K might have far more impact on deductibility than increasing from $20K to $50K. This is where CFOs and HR/CSR leaders must collaborate closely.
How HR + CSR Leaders Can Partner With Finance in 2026
Traditional corporate giving has often been split across departments. The new rules make cross-functional alignment essential.
What HR and CSR leaders should bring to CFOs:
- Employee giving participation and trends
- Impact reporting
- Data on matching gift usage
- Proposed grantmaking framework
- Expected budget needed to exceed the 1% floor (if desired)
Percent Pledge helps teams do this with clean, auditable dashboards inside the Giving Platform.
What Finance cares about most:
- Predictable spending
- Tax exposure and efficiency
- Compliance and documentation
- Reduced administrative overhead
A unified giving system addresses all three stakeholder groups simultaneously.
Real-World Strategies for Different Business Sizes
Businesses around $10M in revenue
- Current giving: typically $25K–$75K
- Impact: unlikely to exceed the 1% deductible floor
- Recommendation: consolidate giving + introduce structured matching gifts + use Cause Credits
Businesses around $50M in revenue
- Current giving: $150K–$400K
- Impact: near the threshold but may fall below
- Recommendation: create an annual corporate grants program and unify all employee giving under one platform
Businesses around $100M+ in revenue
- Current giving: $1M–$10M
- Impact: typically exceed the deduction threshold
- Recommendation: optimize with reporting, nonprofit vetting, and matching programs that drive cultural engagement
These are general ranges, but they give Finance a quick way to model the impact.
How Percent Pledge Helps Employers Navigate 2026 Confidently
Percent Pledge brings all corporate giving into one system, making it easy for Finance, HR, and CSR leaders to collaborate.
Employers get:
- Verified nonprofits for tax compliance
- One place to manage corporate grants, matching gifts, and volunteer rewards
- Automated matching (no forms, no manual review)
- Real-time dashboards for Finance and CSR
- Instant, IRS-compliant receipts for corporate and employee giving
- Built-in engagement tools like the Passion Assessment, Campaigns, and Impact Badges
Everything needed for a compliant, modern, tax-aware giving program.
Final Thoughts
The new 2026 tax rules are a turning point for corporate philanthropy. Employers who adapt quickly — by incorporating structured grants, smarter matching gifts, volunteer rewards, and centralized reporting — will see stronger employee engagement and clearer financial outcomes.
Percent Pledge helps companies build that unified, compliant, high-impact giving strategy. Ready to design your 2026 giving strategy? Pick a time to meet with our team of experts.
