We wanted to make you aware of several key changes to charitable giving under the newly enacted One Big Beautiful Bill Act (OBBBA), which will take effect starting in the 2026 tax year. These updates may impact how you approach your philanthropic strategy going forward.
For Non-Itemizers
- Above-the-line deduction reinstated:
Non-itemizers can now deduct cash donations to qualified charities—up to $2,000 for joint filers and $1,000 for single filers. - Limitations:
This excludes gifts to donor-advised funds, private non-operating foundations, and non-cash contributions.
For Itemizers
- 0.5% AGI floor:
Charitable deductions are only allowed for amounts exceeding 0.5% of adjusted gross income (AGI). - Example: A couple with $300,000 AGI can only deduct donations above $1,500.
- Marginal rate cap:
The tax benefit from itemized deductions is capped at 35% -even for those in the 37% bracket.
For Corporations
- New deduction floor:
Corporate charitable deductions must exceed 1% of taxable income to qualify, with a cap at 10%.
- This may discourage smaller corporate gifts that previously qualified.
For Nonprofits
- These changes may affect fundraising strategies, especially for organizations relying on high-net-worth donors or corporate sponsors.
Strategic Implications
- Accelerated giving: Many advisors expect donors to accelerate contributions in 2025 to maximize deductions before the new limits take effect.
- Planning complexity: Charitable planning will become more nuanced, with greater variation based on income, filing status, and giving vehicles.
The OBBBA is a major piece of tax legislation that introduces broad changes across several areas of personal financial planning. From tax deductions and credits to student loan repayment rules, the law impacts a wide range of planning considerations.
This guide highlights:
- Expansions to existing tax deductions and credits
- A new category of non-itemized below-the-line deductions
- Adjusted rules across multiple tax planning areas
Adjustments to estate & gift tax exemptions, AMT, and more
If you'd like to discuss how these changes might affect your giving strategy—or explore options like donor-advised funds or charitable trusts, we are happy to assist. Let’s discuss a customized strategy for your family. Please email us at clientservices@avodahadvisors.com.
The information herein is for educational purposes. This information does not constitute advice in the area of legal or tax advice. It is your responsibility to seek guidance and advice of your own legal and tax professionals before making any decisions. All investing involves risk, including the possible loss of principal.