Charitable Giving Under the One Big Beautiful Bill Act

What you need to know

The OBBBA introduces new rules that make charitable giving more accessible for non-itemizers and sets thresholds for itemizers. Strategic planning, like donation bundling and timing gifts, can help you maximize tax benefits and ensure your donations have the greatest impact.

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces significant changes to the landscape of charitable giving. These provisions, effective for tax years beginning after December 31, 2025, aim to reshape how individuals and corporations approach charitable donations. Here's a breakdown of the most pertinent updates.

A Deduction for Non-Itemizers

In the past, you could only deduct charitable contributions if you itemized your deductions on your tax return. That meant if you took the standard deduction, your donations didn’t reduce your taxable income at all.

The OBBBA changes this. Starting in 2026, taxpayers who do not itemize can take a deduction for cash donations to public charities:

• Up to $1,000 for single filers

• Up to $2,000 for married couples filing jointly

This is called an “above-the-line” deduction, and it lowers your taxable income even if you take the standard deduction.

Example:
If you are single and donate $1,500 in cash to a qualified charity and normally take the standard deduction, $1,000 of that gift will now reduce your taxable income. Previously, those donations would have had no impact on your taxes.

Important: If you already itemize your deductions, you cannot claim this above-the-line deduction. Itemizers will still deduct charitable contributions through their itemized deductions, subject to the new 0.5% AGI floor for smaller contributions (more info below).

0.5% AGI Floor for Itemized Deductions

For taxpayers who itemize their deductions, a new floor is introduced: charitable contributions will only be deductible to the extent that the total exceeds 0.5% of the taxpayer's adjusted gross income (AGI). For instance, if your AGI is $500,000, the first $2,500 in charitable donations would not be deductible. This provision aims to ensure that only substantial charitable contributions are eligible for deductions.

60% AGI Limit for Cash Contributions Made Permanent

The OBBBA makes permanent the increased limit on cash contributions to public charities. Previously set to expire, the law now allows taxpayers to deduct cash donations up to 60% of their AGI. This provision provides greater flexibility for high-income donors looking to maximize their charitable contributions in a single year.

Cap on Charitable Deductions for High-Income Earners

For individuals in the 37% federal income tax bracket, the OBBBA introduces a cap on the tax benefit of charitable deductions. Regardless of the actual tax bracket, the maximum benefit for a charitable contribution deduction will be calculated using a 35% marginal income tax rate. This change reduces the immediate tax benefit for high-income earners making charitable donations.

Corporate Contribution Floors and Carryforwards

Corporations will now face a 1% AGI floor for charitable deductions. Contributions below this threshold are not deductible, while those above can be deducted up to 10% of taxable income, with a five-year carryforward for excess contributions. This adjustment aims to encourage more consistent and substantial corporate giving.

Strategies to Make the Most of Charitable Deductions

With these new rules under the OBBBA, there are ways to maximize your charitable giving while keeping your taxes efficient:

1. Donation Bundling
   Instead of giving smaller amounts each year, consider bundling multiple years of donations into a single year. This is especially useful if you’re itemizing and need to exceed the 0.5% AGI floor to get a deduction.

2. Timing Your Gifts
   Plan the timing of large contributions carefully. For example, if your income varies year to year, you may want to give larger donations in higher-income years to maximize tax benefit under the 60% AGI limit.

3. Focus on Cash Donations to Public Charities if You Take the Standard Deduction
   The above-the-line deduction only applies to cash gifts to public charities, not donor-advised funds or private foundations. Knowing this helps you choose the most tax-efficient giving method if you take the standard deduction.

4. Coordinate With Your Tax and Financial Plan
   Work with your advisor to integrate charitable giving into your broader financial plan. Smart planning can help you make impactful gifts while minimizing your tax burden.