Starting intax year2026,theOne Big Beautiful Bill’s changes tofederal income tax rules for charitable givinggo intoeffect.Both corporations and individuals intending to make charitable contributions in the coming years will be affected.
Among the changes:Corporations will have updated limits to work with.Individualswhoitemizetheirdeductionswill seenewfloorson their adjusted gross income (AGI). Andthose whodon’titemize will see the return ofan above-the-line deduction, making it possible to see a tax benefit for charitable gifts without having to exceed the standard deduction.
No matter whichcategoryyou fall into,revisitingyourplans for charitable givingwill bea critical part of your taxstrategyin2025, 2026,and beyond.Below,we’llbreak down the new rules,offerexamples, and highlight practical strategiesto help youmaximize yourdonationswhile stayingtax-smart.
What is the new above-the-line deduction for non-itemizers?
For the first time since the temporary COVID-era provisions, non-itemizing taxpayers may claim an above-the-line deduction for cash contributions to public charities (excluding donor-advised funds and supporting organizations). Thisdeduction is capped at $1,000 for single filers and $2,000 for married couples filing jointly, per year.
Howdoes the new AGI Flooraffectitemizers?
Itemizing taxpayers may only deduct theportionof their total charitable contributions thatexceeds0.5% of AGI. Thisnewfloor applies to all types of charitable contributions and is calculated before applying the traditional AGI percentage limits.
AGI Percentage Limits for Itemizers
- Cash contributions to public charities: 60% of AGI limit isnowpermanent.
- Non-cash contributions to public charities: 50% ofAGIlimit.
- Contributions to private foundations or for appreciated property: 30% of AGI limit.
- Contributions of appreciated property to certain private foundations and other non-50% organizations: 20% of AGI limit.
How does the OBBB limit deductions for high-income taxpayers?
For taxpayers in the 37% bracket, the value of itemized deductions (including charitable contributions) under the OBBB is limited to 35% of the deduction amount. Itemized deductions are reduced by 2/37 of the lesser of (a) total itemized deductions or (b) the amount by which taxable income (plus itemized deductions) exceeds the 37% bracket threshold.
What are theOBBB’scharitable contribution rules for corporations?
Corporations now face a 1% of taxable income floor for charitable deductions. Only contributions exceeding 1% of taxable income are deductible, up to the 10% cap. Amounts disallowed due to the floor can be carried forward for up to five years, but only from years in which the 10% cap is exceeded.
Your Takeaway: Key Planning Strategies for Charitable Contributions Under OBBB
- Accelerate Gifts:Considermaking largercharitable gifts in2025 to avoid the new floors and limitationsthat begin in 2026.
- Bunch Contributions:Itemizers maybenefitfrom“bunching”several years’ worth of donationsinto a single year. This can helpto exceed the 0.5% floor and maximize deductions.Youcan do this with outright gifts, or with gifts to adonor advisedfund (DAF). Gifting through a DAF allowsyou to make a large, immediate deduction nowwhiledistributing to charitiesover time.
- UtilizeQualified Charitable Distributions (QCDs):Taxpayersage70 ½+ can make tax-freeIRA distributions toqualifiedcharitable organizations, which count toward required minimum distributions andreduce taxable income.Theseindividuals can donate up to $108,000 per person in 2025 and$111,000 in 2026.
- Cash Gifts for Non-Itemizers:Starting in 2026, if you take the standard deduction, take advantage of the newabove-the-line deduction for cash gifts to public charitiesup to your filing status limit ($1,000 single/$2,000 joint).
Understanding the nuances of charitable contribution deductionsisn’tonlycrucial for effective financial planning; it can helpmaximizethe impact of yourgenerosity. By staying informed about thelatest IRS rules and limitations, you can make strategic decisions that align with both your philanthropic goals and tax planning needs.
If you have questions or needassistancenavigating your charitable giving strategy,thetax professionals at èƵ can helpensure your contributions not only support the causes you care about but also work to your advantage duringtaxseason.Clickhereto learn moreor contact us.
Frequently Asked Questions
Q: Do the OBBB changes apply to the 2025 tax year?
A: No, these new rules for charitable contributions, including the AGI floors and non-itemizer deduction, are effective for tax years beginning after December 31, 2025.
Q: Can I use the above-the-line deduction for a gift to my family’s private foundation?
A: No, the above-the-line deduction for non-itemizers is only for cash contributions to public charities. It explicitly excludes contributions to donor-advised funds, supporting organizations, and private foundations.
Q: What happens if my donation is below the 0.5% AGI floor?
A: If you are an itemizer and your total annual charitable contributions do not exceed 0.5% of your AGI, you will not be able to deduct any of those contributions for that tax year.