What Is a Carry Forward Charitable Deduction?

When a donor makes a charitable gift to a qualified organization, the IRS may place a limit on how much of the donation can be deducted for that tax year. Generally, the deduction limit is capped at 50% of your adjusted gross income, but certain situations may result in different deduction limits. With IRS deduction limits in place, donors whose contributions exceed specific AGI thresholds may find that portions of their charitable gifts cannot be applied to their taxes. In cases like these, a carry forward charitable deduction, also known as a carryover, can be used. 

 A carry forward charitable deduction is a technique that allows a donor to apply the amount exceeding the limit to their taxes for up to five subsequent years. For families engaged in purpose-driven financial planning, this rule can be a practical tool to help support the preservation of potential tax benefits.  

At 5280 Associates, our team of financial professionals works with clients in Denver and beyond to integrate charitable giving into a broader tax and estate strategy. Understanding this carryover rule is one of the first steps toward giving more intentionally. 

The IRS limits how much of your charitable contributions you can deduct in any single tax year, based on your Adjusted Gross Income (AGI). When your generosity exceeds those limits, the IRS does not simply disallow the remainder. Under Internal Revenue Code Section 170(d), the excess amount is treated as a charitable contribution carry forward, meaning it can be applied to each of the five tax years that follow. 

AGI Thresholds That Trigger a Carryover 

The IRS applies a tiered system of deduction limits based on the asset type and the receiving organization. When your total contributions in these categories exceed these percentages of your Adjusted Gross Income (AGI), the excess is codified as a carry forward. 

While the five-year window outlined in Internal Revenue Code Section 170(d) offers flexibility, it also requires careful adherence to IRS rules to avoid the potential loss of the deduction. Missing any of these can result in losing a deduction permanently. 

You Must Itemize Each Year You Claim the Carryover 

A carry forward charitable deduction can only be claimed in years when you itemize deductions on Schedule A. If your total itemized deductions do not exceed the standard deduction for that year, you cannot use the carryover, though the clock on the five-year window is still ticking. For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. 

Current-Year Donations Come First  

The IRS requires that you apply your current-year charitable contributions before touching any carry forward amounts. Once current-year donations are accounted for, you apply carryovers in order, oldest first. This “First-In, First-Out” ordering rule prevents donors from selectively choosing which years to use the carryover. 

Unused Carryovers Expire After Five Years  

Any unused portion of a carryover that has not been claimed within five consecutive tax years is lost forever. Record-keeping for carryover balances is the responsibility of the taxpayer. Maintaining your own records, including prior tax returns, Form 8283 for non-cash gifts, and a running carryover worksheet, is the only way to protect these deductions. 

The carry forward charitable deduction rule may be particularly beneficial for donors making large, concentrated gifts in a single year. Several situations commonly give rise to a meaningful carryover: 

• Business sale or liquidity event: Donors who contribute appreciated private stock or business interests in the year of a liquidity event often exceed the 30% AGI cap in a single transaction. 

• Bunching strategy with a Donor-Advised Fund (DAF)*: Donors may consider consolidating multiple years of planned giving into one contribution for itemizing in high-income years. When bunched charitable donations exceed AGI limits, the carry forward captures any excess. 

• Major gift of appreciated real estate or securities: Long-term appreciated assets donated directly to a charity or DAF are subject to the 30% limit, making carryovers more likely for high-value donations. 

• Year-end tax planning decisions: Donors who accelerate giving before anticipated tax law changes may intentionally create carryovers as part of a multi-year strategy. 

Now that we have moved past the 2025 tax filing season, we are operating under the full implementation of the One Big Beautiful Bill Act (OBBBA). For donors, 2026 introduces changes that may affect how charitable contributions are calculated, requiring a more proactive approach to timing and asset selection than in years past. 

You Must Itemize Each Year You Claim the Carryover 

As of January 1, 2026, itemizing taxpayers may be required to clear a charitable floor equal to 0.5% of their Adjusted Gross Income (AGI) before their contributions provide a tax benefit. This means your first dollars of giving each year may be effectively non-deductible, as only the amount exceeding this 0.5% threshold can be claimed as an itemized deduction. 

A bunching strategy is one method some donors consider for managing this change. When contributions are bunched, the donor is able to concentrate several years of charitable intent into a single tax year to clear the floor by a wider margin. Utilizing tools like a Donor-Advised Fund (DAF) allows you to make one large contribution today, clearing the potential 0.5% floor for 2026, while distributing those funds to your favorite charities over the next several years.

The 35% Cap on High-Income Deductions

For those in the top 37% federal income tax bracket, the OBBBA has introduced a specific cap on the value of itemized deductions. Even though your marginal tax rate remains at 37%, the tax benefit of your charitable deductions is now capped at 35%. This 2% valuation gap means that every dollar donated provides slightly less tax relief than it did previously. This change may prompt a review of the potential benefits of tax-efficient giving through appreciated assets rather than cash.

The Value of Grandfathered Carryovers 

While 2026 introduces new rules, there is a silver lining for those who established carryovers in prior years. Any excess charitable contributions made before January 1, 2026, that are being carried forward into this year remain grandfathered. 

These carryover amounts are not subject to the 0.5% AGI floor when applied to your 2026 return. Remaining 2025 carryover credits, which are eligible for use through the 2030 tax year, could potentially provide a benefit as first-dollar deductions. This strategy may help support your current-year liquidity, although the actual impact depends on your specific filing status and should be evaluated in collaboration with your tax professional to address potential limitations. 

Consider a Denver-area couple with a combined AGI of $300,000 who donates $150,000 in appreciated stock to a DAF in a single year. The 30% AGI limit allows them to deduct $90,000 in the year of the contribution. The remaining $60,000 becomes a carry forward charitable deduction, available to apply over the next five years. 

How the Carryover Plays Out Year by Year  

In year two, assuming their AGI remains $300,000, they can apply up to $90,000 of the carryover (30% of AGI), but since they only have $60,000 remaining, the entire balance is deducted. If their income fluctuates and they do not itemize in a given year, that year counts against the five-year window regardless, making early application preferable where possible.  

Hypothetical example is for illustrative purposes. May not be representative of actual results. 

Tracking Is the Donor’s Responsibility 

The IRS does not maintain a running balance of carryovers for individual filers. Keeping the original tax return, Form 8283 if non-cash assets were donated, and a simple carryover worksheet is the primary method intended to help protect these deductions. 

Notice:

The concepts in this blog are intended for educational purposes only. They may not be suitable for your particular situation. The suitability of any specific product or strategy will be dependent upon your particular situation. Thrivent Advisor Network and its advisory persons do not provide legal advice, accounting or tax advice. You should consult with your attorney, tax advisor or accountant before implementing any strategy covered in this blog.

*Some Donor-Advised funds are considered mutual funds and are sold only by prospectus. The prospectus will provide information on charges, risks, expenses, and investment objectives and should be reviewed carefully before investing. Investment companies can provide a prospectus, or you may prefer to ask your financial professional. Please read it carefully before you invest or send money.