charitable giving

The recently enacted One Big Beautiful Bill (OBBB) makes several noteworthy changes to the federal income tax rules for charitable deductions. While the law creates new opportunities for certain taxpayers, it also imposes new limits on higher-income donors beginning in 2026. Understanding these shifts will be key for individuals and fiduciaries planning charitable gifts over the next several years.

A New Deduction for Non-Itemizers Starting in 2026, taxpayers who claim the standard deduction will once again be able to deduct limited charitable contributions. The OBBB allows an “above-the-line” deduction for cash gifts made directly to qualified public charities, up to:

$1,000 for single filers, or

$2,000 for married couples filing jointly.

This deduction is not available for gifts to donor-advised funds (DAFs), supporting organizations, or private non-operating foundations.

A New “Floor” for Itemized Deductions For taxpayers who continue to itemize, the OBBB introduces a new threshold. Beginning in 2026, only the portion of charitable contributions that exceeds 0.5% of adjusted gross income (AGI) will be deductible.

Example: A taxpayer with $400,000 of AGI may deduct only contributions above $2,000 (0.5% × $400,000).

This “floor” reduces the benefit of smaller charitable gifts but retains the deduction for larger contributions, subject to the existing percentage-of-AGI limits.

Cap on the Tax Benefit for High-Income Donors Also taking effect in 2026, taxpayers in the highest marginal bracket will see their charitable deduction benefit capped at 35%, even if their top rate remains higher. This change effectively limits the tax value of charitable giving for the wealthiest donors.

The 60% AGI Limit Becomes Permanent

The law makes permanent the rule allowing deductions of cash gifts to public charities up to 60% of AGI, eliminating uncertainty about potential sunset provisions that had been scheduled under prior law.

Planning Ahead: 2025 May Be a Strategic Year Because the new limitations take effect after 2025, accelerating charitable contributions into 2025 may provide enhanced tax savings under the current rules. High-income taxpayers and those planning major charitable gifts—particularly through DAFs or private foundations, should evaluate timing carefully.

Key Takeaways

• Non-itemizers gain a new limited deduction for cash gifts starting in 2026.
• Itemizers face a new 0.5% AGI floor and a 35% cap on the deduction benefit for top earners.
• The 60% AGI limit for cash gifts to public charities is now permanent.
• 2025 presents a planning opportunity before the new restrictions apply.

Conclusion The “Big Beautiful Bill” signals a rebalancing of charitable-giving incentives—expanding access for standard-deduction filers while narrowing benefits for higher-income taxpayers. Law firms advising individuals, estates, and charitable organizations should ensure clients understand the timing and scope of these changes when structuring gifts or planning for 2025 and beyond.

Disclaimer: This article is provided for informational purposes only and does not constitute legal, tax, or financial advice. Readers should consult their legal or tax advisor to evaluate how these changes may apply to their individual circumstances.